Preamble

The House met at half-past Nine o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Orders of the Day — Parliamentary Control of Expenditure (Reform) Bill

Order for Second Reading read.

Mr. Norman St. John-Stevas: I beg to move, That the Bill be now read a Second time.
I hope that this will be an auspicious day. I know that tomorrow will, as it is the anniversary of your birthday, Mr. Speaker. May I start by giving you, on behalf of my self and the House, our good wishes?
It is no exaggeration to say that this Bill raises a constitutional issue of major and first-class importance. For 700 years, the power of Parliament has rested on one thing above all others—its control of the granting and spending of public money. It was over that principle that the civil war was fought. It was over that principle that the House of Lords was deprived of many of its powers in 1910, and it is that principle which has led to the Bill. It is an intrinsic part of those reforms that I had the honour to introduce as Leader of the House in the early days of the present Government. They were designed to shift the balance of power away from the bureaucracy of Whitehall, back to the elected representatives of the people at Westminster.
Of course, the Bill has led to a clash between Parliament and vested interests and between the legislature and the Executive because it asserts, once again, Parliament's historic claim to take action on finance on behalf of the people. That has been recognised by the press, the fourth estate of the realm. Rarely has a private Member's Bill commanded so much support. It has united papers of such different views as The Times, The Daily Telegraph, The Guardian, The Standard and the Daily Mail. It is clear, therefore, that it has the support of quality and popular newspapers alike. I shall quote just two examples.
An excellent leader in The Guardian yesterday said:
The crucial difference would be that the scrutineer would be answerable to Parliament rather than Whitehall and for that crucial alteration in the balance of power this bill deserves a fair wind.
The Daily Mail makes the point rather more graphically this morning. It says:
Norman deserves to conquer with his Bill.
However, the Bill has not emerged from a vacuum. It is the culmination of a series of debates and reports that go back over a decade. I should like to pay tribute to three

right hon. and hon. Members in particular. The first is the hon. Member for Norwich, South (Mr. Garrett) who may claim to be the grandfather of the Bill. He pioneered the idea of re-establishing the Comptroller and Auditor General as an Officer of the House of Commons. The second is the right hon. Member for Heywood and Royton (Mr. Barnett) who has been an outstanding Chairman of the Public Accounts Committee and is respected in every part of the House.
Finally, I pay tribute to my right hon. Friend the Member for Taunton (Mr. du Cann) who, when I was looking for a procedural measure to introduce, suggested that I try to implement the recommendations of the Public Accounts Committee's 1981 report. Throughout the weeks of drafting and discussion, he has been a tower of strength. That is just what I expect from my right hon. Friend. When I was Leader of the House, at crucial moments in the reform debate or in the debate about Members' salaries and facilities—indeed, on any matter that promoted the good of the House—one certain factor was the steadfast support of my right hon. Friend. He is one of the great parliamentarians of this generation.
I shall make one further preliminary point. This is a House of Commons matter, not a Government matter. I am delighted to see the Chief Secretary on the Treasury Bench to give the Government's view. But it is the Commons that has to decide on the Bill, not the Government. However, I ask my right hon. and learned Friend to deal with one point. Will he make it clear that if the House gives the Bill a Second Reading the necessary money resolution will be forthcoming? That is the principal procedural point on which we wish to hear the Chief Secretary today.
The Bill has three purposes. The first is to establish that the appointment of the Comptroller and Auditor General should be made by Her Majesty on behalf of the House, and not of the Government. Since the office was set up by Mr. Gladstone in 1866, it has been recognised that the CAG acts on behalf of Parliament. The Bill will make him again in principle what he has long been in practice, a great Officer of the House.
Secondly, the Bill recognises the principle that Parliament has the right to follow public money wherever it goes. It embodies the principle of parliamentary accountability for moneys voted by the House. However, it is not possible in practice for every penny of the taxpayers' money to be pursued. After consultation with the Treasury, therefore, I modified my original draft to limit its application to bodies mainly supported by public funds and to the nationalised industries. I shall deal further with those points when I go through the Bill.
Thirdly, the Bill would set up a National Audit Office and brings parliamentary and other arrangements for audit up to date. Unfortunately, in that, as in so many other matters, we have lost the initiative. We have lost our position as pioneers and are following the lead of other countries such as the United States, Canada, Australia and various European States.
I shall go through the various clauses of the Bill in outline. Of course detailed consideration of the Bill must remain until the Committee stage. It falls into two parts. Part I deals with the nature and scope of the audit Part II deals with the setting up of the National Audit Office and the appointment of the CAG.
Clause 1 gives the CAG statutory power to carry out economy, efficiency and effectiveness examinations of the accounts of Government Departments and other bodies in


relation to which he has statutory rights. It provides a firm statutory basis for what has hitherto rested on convention and practice. The purpose of an efficiency audit is to assess the work that is being done, to draw attention to any financial weaknesses and to make suggestions for improvement.
Clause 2 extends the scope of efficiency audits from Government Departments to nationalised industries, publicly owned corporations and companies of which more than 50 per cent. of the voting shares are publicly owned. Local government is excluded from the clause because there are already arrangements for the participation of the CAG under the Local Government Finance Act 1982.
It is around the nationalised industries that most of the controversy over the Bill has centred. I hope that the House will bear with me if I devote some minutes to that issue. The case for parliamentary accountability rests on a threefold basis. First, those interests and industries are publicly owned. Parliament represents the owners. Secondly, parliament represents the customer or the consumer, but owing to various conventions has been unable to act directly on their behalf. Thirdly, nearly £3 billion of public money goes to the industries in the form of subsidies, and behind the industries stands the House. Because of that, their borrowing power is greatly increased.
Fears have been expressed by some leaders of the nationalised industries—not all—that the Bill will impair their commercial autonomy and independence, and that their management will be interfered with. No doubt those fears are deeply felt, but they are not grounded in any reality. If they were, is it conceivable that the Bill would have received, as it has done, the enthusiastic support of Mr. Walter Goldsmith and the Institute of Directors? [HON. MEMBERS: "Oh."] I am glad to have such distinguished support. It may help some more than others.
The Bill gives the CAG no power to interfere with policy or commercial judgments, nor has he the slightest desire to do so. As he makes plain to me in a letter, his concern is not with policy aims but with the means by which they are achieved, whether there are adequate financial systems, whether management information is sufficient and whether the decision-taking systems are efficient. There will be no second guessing, no attempt to review with the advantage of hindsight decisions that management has had to take in advance of the audit.
The chairmen also expressed fears about the confidentiality of their information. The CAG and the Public Accounts Committee have handled such matters for over 100 years. In the more sensitive areas of security and defence there has been not one complaint. On privatisation—I must not pronounce upon the political desirability or undesirability of it, but I address this remark to those who fear that that process may be hindered—the Bill is totally neutral. If a firm is wholly privatised, the CAG will move out. If it is a mixed company with the Government retaining a majority shareholding, the CAG remains.

Mr. Tim Eggar: Will my right hon. Friend give way?

Mr. John Prescott: Will the right hon. Gentleman give way?

Mr. St. John-Stevas: I shall give way in a moment.
Private investors will have an additional reassurance that the company is being efficiently and properly run. Furthermore, the CAG already has considerable commercial expertise. That will be added to as the proposals in the Bill are carefully and gradually implemented.

Mr. Prescott: I should like to pursue the right hon. Gentleman's point about the Bill being neutral on privatisation. It is Government policy to have a minority shareholding in some public industries that have been privatised—about 49 per cent. There is considerable public money in those companies. Apparently, the Bill would not allow the CAG to carry out an investigation into those companies.

Mr. St. John-Stevas: Careful discussion is needed about the position of companies over which control is exercised by the Government, not through majority shareholding. I appreciate the hon. Gentleman's point. I hope that we can discuss it later.

Mr. Eggar: Will my right hon. Friend give way?

Mr. Nick Budgen: Will my right hon. Friend give way?

Mr. St. John-Stevas: I should like to continue with my speech, as many hon. Members wish to speak. Hon. Members will have an opportunity to make their points, should they be called to speak.
The only argument against the Bill that has any substance is that a proliferation of bodies will be looking at the industries. I have great sympathy with that, but the Bill contains a quid pro quo. The clause must be read in conjunction with schedule 5, which is the repeal schedule that removes the powers of the Treasury to order audits of any company, including nationalised industries, under the Exchequer and Audit Departments Act 1921, and, even more important, the powers of the relevant Minister to order the Monopolies and Mergers Commission to investigate the efficiency of nationalised industries under the Competition Act 1980.
The significance of that Act is that it conceded the principle of efficiency auditing of nationalised industries, but it gave it to the wrong body. The great objection to the Monopolies and Mergers Commission is that it is not independent. It can act only on ministerial fiat. It cannot decide which industries to look at nor when, nor what operations to examine. Of course, ministerial power was increased by the Competition Act, but it did nothing for parliamentary accountability. In addition to removing the powers of the Monopolies and Mergers Commission, there is a further safeguard in the clause that lays down that a major examination may be carried out only after consultation with the Government Department concerned. That should help eliminate duplication.
The nationalised industries have conducted a campaign against the Bill, which they are entitled to do. They are quite wrong to regard the Comptroller and Auditor General as an enemy. He is not. He is a potential ally. The aim is the creation of efficient industries. The CAG will not be concerned with bureaucratic nit-picking. Nothing in his record substantiates that accusation. With balanced and rounded reports, he will set out the good with the bad. The extended activities will keep the public and the media better informed about these industries than ever before. That is what has happened in the United States, where the


National Audit Office has wider powers than any conferred by the Bill. It has become a respected body that is consulted and imitated by industry. I believe that the same will happen here.
I hope that the chairmen of the nationalised industies will adopt a more constructive attitude to the Bill than just defending vested interests. My sponsors and I welcome a continuing dialogue with them to examine how their reasonable objections can be met and how the Bill can be improved.

Mr. Frank Hooley: I am a supporter of the right hon. Gentleman's Bill, and will vote for it today. Would not the fundamental purpose of the Bill still be achieved even if the clause was not included?

Mr. St. John-Stevas: Part of the fundamental purpose would be achieved, but not another purpose. The Bill has twin purposes—to restore the appointment of the CAG to the House by means of an Address to Her Majesty; and to extend the remit to cover the nationalised industries and other companies where public money is involved. I believe that those basic principles are co-ordinate.
Clause 3 gives inspection rights to the CAG of public sector bodies that are mainly supported from money provided by Parliament. It excludes local government.
Clause 4 gives access to the books of private sector bodies that are mainly supported by central Government funding, either from votes or from the National Loans Fund. Under the clause, a repetition of the De Lorean fiasco could be avoided.

Mr. Eggar: Is it not correct that under clause 4 all the companies that have been privatised under the Government, with the exception of the National Freight Corporation, could have the Comptroller and Auditor General examine their books?

Mr. St. John-Stevas: I cannot subscribe to that statement. If any company falls within the terms of the clause, the CAG will be available to conduct efficiency audits. It is a help to, not an attack on, the companies to have an independent, unbiased and impartial review by somebody of that status.
Clause 5 is a permissive clause that gives the CAG a power in parallel with the present power of the Secretary of State to appoint auditors to health authorities.
Clause 6 is a general access clause to enable the CAG to discharge his duties under other parts of the Bill.
Clause 7 is another permissive clause enabling the CAG to report to Parliament the results of his audit at any time.
That concludes my guide to part I of the Bill, and I turn now to part II which sets up the Public Accounts Commission and the National Audit Office.
Clause 8 creates the Public Accounts Commission, composed of Members of Parliament. It should be read together with the details set out in schedule 1. I should be happy to see those functions exercised by the House of Commons Commission, but it would present the Public Accounts Commission with difficult administrative problems at a time when it was fully stretched.
Clause 9 deals with the functions of the commission. It gives the control of expenses of the National Audit Office to the House. It is the first example of a House of Commons cash limit. It provides for an accounting officer and an auditor of the auditor. It answers the question, quis custodiet ipsos custodes?
Clause 10 establishes a National Audit Office and provides for a separate Vote. It should he read in conjunction with the details in schedule 3. The CAG should be free—and be seen to be free—and independent of the Executive.
Clause 11 makes it clear that the CAG is an Officer of the House and provides for his appointment by the Queen to preserve his status and independence, but after an Address of the House of Commons.
Clause 12 brings in the Public Accounts Committee with powers to request the CAG to conduct audits. The system of audits has worked well in the past because of the co-operation between them. I am confident that that will continue in the future.
Clauses 13 to 15 concern minor but important matters. They allow the CAG to charge for services—which, surprisingly, he cannot do at the moment. I am glad to say that the clients do in fact cough up. Provision is made for an indemnity for himself and his staff. In the private sector, that would come from insurance. The CAG is authorised to provide premises.
Clauses 16 and 17 and schedules 4 and 5 deal with amendments and repeals, to which I have already referred.
Clause 18 is a standard clause dealing with expenditure.
The Bill asserts the historic rights and duties of the House of Commons on taxation and expenditure. It makes no attempt to take over managerial or governmental functions. In all its long history, save for a disastrous period under the Commonwealth, Parliament has made no claim to govern, but it does claim to do something equally important. It subjects the Executive to limitations and controls; it protects the individual citizen against the arbitrary use of power; it ensures that taxes have the support of the legislature, and that expenditure is properly accounted for.
On the principle of parliamentary accountability, there can be no compromise. On its application, the sponsors of the Bill are open to representations. The Bill could be another milestone in the continuing struggle to enable Parliament to fulfil its historic function of protecting the rights of the people. I commend it to the House.

Mr. Joel Barnett: I thank the right hon. Member for Chelmsford (Mr. St. John-Stevas) for his very kind reference to myself. I take it to include all members of the Public Accounts Committee. Without them and without their unanimous support in preparing and publishing our report, there would be no basis for this excellent Bill.
The Bill is based primarily on the report of the Public Accounts Committee. For myself, I consider it a privilege to have been able to help the right hon. Gentleman and others in preparing it. It should be strongly supported by all who care about the principle of democratic accountability to Parliament. That is the first and basic principle underlying the Bill.
It is traditional to congratulate the sponsor of a private Member's Bill. I do so, not because it is a tradition, but because I feel strongly that the right hon. Gentleman deserves rather more than the customary formality of congratulation for introducing such an important Bill. It is an historic opportunity. The House can assert its rights, and in so doing I hope that the Government—including the Chief Secretary to the Treasury—will recognise that there should be proper accountability to Parliament. Apart from


that, the objective of the underlying principles of the Bill should be supported by any Government, of any party. It will help to achieve better value for money in public expenditure, which must be in the interests of everyone in the House, whatever policy underlies the public expenditure.
I do not believe that I can emphasise too much that true accountability to a democratically elected House is in the vital interests of all, whatever differences there may be between hon. Members on different aspects of the Bill. Ministers should not object to the Bill on the ground that it in some way supersedes ministerial accountability to the House. We all know that the Bill makes a reality of ministerial accountability, which currently does not exist.
The right hon. Gentleman admirably explained the detail of the Bill, and there is no need for me to attempt to repeat any of that. I simply wish to take some of the parts of the Bill that have caused the greatest anxieties and attempt to relieve some of them—for example, the anxieties about nationalised industries, other public bodies, the new National Audit Office and the CAG. The area that has caused the greatest controversy is the nationalised industries. If we accept the principle that the House should be entitled to follow public money wherever it goes—the nationalised industry chairmen do accept that—there is a limit to how far the House should be willing to qualify the extent that it does so.
In recognising that anxiety, the right hon. Gentleman and other sponsors have been prepared to qualify and limit the extent to which we can follow public money. We have excluded local authorities from the Bill—although I understand that there may be a slight worry in that area that can be resolved in Committee. I would have preferred to have gone further. However, I accept that the Local Government Finance Act 1982 has gone some way towards helping in that area.
I understand the worry and anxiety of the chairmen that there might be undue interference and a negative style of investigation. They are worried about interference in their general management job. It is a mystery to me how they can consider it acceptable for the Monopolies and Mergers Commission to do the job, but will not accept a National Audit Office of the House. Without being overly suspicious, I wonder why they should be so concerned to leave the job with the commission and exclude the House.

Mr. Michael English: It is also rather surprising that the chairmen should not see fit to mention that the Treasury already has the power under the 1921 Act to order the CAG to audit any account of any body in the country, whether it be a nationalised industry or a private company.

Mr. Barnett: When we tell the nationalised industry chairmen about the way in which the Public Accounts Committee and the CAG have worked for more than 100 years, they say "But you might not work in that way." They are applying different standards. However, I understand their worries, and if I thought that they were well-founded I would not sponsor or support the Bill.
As chairman of the PAC, I have seen how the CAG and its staff work. Everybody who has studied their work should recognise that it is carried out in the best interests of those with whom they work. They are not in opposition to them, but are working with them. When Departments

have to appear before the PAC they are worried about where they have made mistakes, but they also say that they welcome the CAG, his staff and the PAC and all the work that they do to help make them more cost-effective in the use of public money.

Mr. Budgen: Will the right hon. Gentleman explain where responsibility for the activity of the CAG and his staff of 800 will rest? Would the chairman of the PAC accept a quasi-ministerial responsibility, and be responsible to the House? How would it work? I am sure that the right hon. Gentleman will agree that it is a constitutional innovation of considerable importance.

Mr. Barnett: I understand the hon. Gentleman's point, but the assumption that underlies it is wrong. There is no question of the chairman of the PAC holding a quasi-ministerial position. I am surprised at the hon. Gentleman's question because, although the CAG has independence in practice, in reality he can be interfered with by the Treasury. The Bill will give the CAG absolute independence, which an auditor should have.

Mr. Budgen: The Bill gives the CAG a new position.

Mr. Barnett: Of course it does—it gives him an independence that he does not currently have because he can be interfered with by the Government of the day. I would have thought that the hon. Gentleman would find that as unsatisfactory as I find it.
The nationalised industry chairmen are wholly misconceived in their opposition to the Bill, although I understand their anxieties. The new National Audit Office would be working in total co-operation with the industries, not in opposition to them. It would be in their best interests to use that co-operation to their advantage. No one is seeking to interfere with them.
I have supported amendments to the original draft of the Bill to qualify the powers. In some ways, I would have preferred not to have done so but to have left the Bill as it was. But I recognise that in this world and this place there must be some compromise to achieve the major principle that underlies the Bill. I would be prepared to support further amendments—provided that they did not interfere with the basic principle of the Bill—if I thought that it was necessary to make it even clearer that the powers are not intended to allow the CAG to second-guess the industries. The Bill is not about interfering with management or commercial judgment of the industries. That is the last thing that the CAG is there to do. The Public Accounts Committee does not interfere in the policies of Government, but looks only to see how they are implemented in the most cost-effective way. That is how it would work with the nationalised industries. They have nothing to fear.
The powers in the Bill are substantially qualified. Clause 2(1) confers inspection rights, but only to
carry out economy, efficiency and effectiveness examinations",
It will not examine objectives of Government policy—whichever party is in power—or the commercial judgment of nationalised industries. Clause 2(2) states categorically:
Any major examination shall be undertaken after consultation with the responsible government departments
We are trying to relieve the anxieties of the industries. We emphasise that by co-operating with the sponsor Department they would ensure that it is not interfering in policy or on a day-to-day basis with their commercial judgment.
With these and if necessary other amendments, we shall relieve the anxieties that the nationalised industries have about what they call the blunting of their entrepreneurial edge. I hope that it will be recognised by the House that the powers granted are the minimum that the House of Commons should have to meet the underlying principle, and assert our rights to follow public money wherever it goes.
In the case of some other public bodies, about which some hon. Members have worries, the inspection rights are qualified, as with nationalised industries, and further restricted to bodies that are "mainly" in clause 3(1)
supported … from moneys provided by Parliament
as they are in clause 4. I understand the worries of hon. Members that, where there has been privatisation, there would still be an opportunity, under the Bill, and depending on the definition of the word "mainly". However, hon. Members must ask themselves whether, if 50 per cent. of a company's capital is there on behalf of taxpayers' money, it is unreasonable that the House should have the right to follow it and to follow it for the purposes of which I have spoken, not to interfere with commercial judgment or to blunt the entrepreneurial edge, but to ensure that we get better value for money from public funds. Is that unreasonable?
The other worry of the nationalised industries is that there will be a duplication of interference through other bodies, the Ministers and Select Committees. The Bill seeks to remove one possible duplication by removing the role of the Monopolies and Mergers Commission, as it is not necessary to have both the MMC and the CAG. I hope that that would be generally acceptable as an elimination of duplication.

Mr. Hugh Dykes: I agree with the right hon. Gentleman, but to return to his previous point, is he aware that most chairmen of the nationalised industries are fussing about the effects of privatisation, yet the chairman who is most worried is the chairman of British Steel—which has little prospect of being privatised anyway—under whose aegis the British Steel Corporation has not done very well?

Mr. Barnett: I do not wish to go into the emotive subject of which nationalised industries deserve to be looked at more closely. It cannot be said that because one nationalised industry makes money and one loses money it should necessarily be the one making money that is making the best use of public money. The basic principle is that when substantial amounts of public money are involved, it is not unreasonable to exercise the democratic principle of allowing the House of Commons, through the new National Audit Office, to follow the money for the purposes spelt out in the Bill.
My final point concerns the new National Audit Office and the position of the CAG. The Bill's provision and the Public Accounts Committee's recommendation stem from the same obvious need for the CAG and his staff not only to be truly independent but to be seen to be truly independent. Members of the Public Accounts Committee will recall with some interest the occasions on which we have had witnesses from local authorities of both parties. It was clear from the answers that they gave that they equated the CAG and his staff with the Executive. They took the two as being the same. That was one of the reasons, although not the only one, why they did not want

the CAG to interfere with the local authorities. It was clear that they and many others considered that the CAG and the Government of the day are almost one and the same body.
It is, therefore, all the more important that, not only should the CAG be independent, as he is today, but that he should be seen to be truly independent. As the Bill is set out, the CAG should now be seen to be independent. He must have the maximum independence, and that is why the Bill sets out the method of appointment under letters patent.
I end as I began. The Bill is a historic measure that gives back to the House of Commons the rights that it should always have had to follow public motley that it voted on behalf of the people it represents. At the same time, it recognises the need to safeguard the interests of those who are doing a good job on our behalf. It is a long overdue Bill, and I strongly recommend it to the House.

Mr. Edward du Cann: As the predecessor of the right hon. Member for Heywood and Royton (Mr. Barnett) as Chairman of the Public Accounts Committee for some five years, I am more than happy to join with him in paying tribute to my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas). It is excellent that he has taken this subject as his responsibility, and I congratulate him. I also thank him for the kindly personal comments that he was good enough to make about me. We are the servants of this House and of those who are generous enough to elect us. If any of us can play any part in discharging that responsibility with conscientiousness and honour, it is reasonable to believe that our time here is properly spent.
None the less, I have two regrets about the Bill. The first concerns the fact that it is properly a principle that parliamentary scrutiny should follow expenditure coming from the taxpayers' purse and which is voted by Parliament, wherever it goes. Therefore, it is a pity that the Bill is not universal. The right hon. Member for Heywood and Royton made an admirable speech and gave much reassurance to many of those who, while expressing appreciation of the Bill's virtues, have also expressed worries about it. I recognise that politics is the art of the possible.
My second regret is that this is not a Government sponsored measure, and it would have been much better if it had been. I rejoice that today we are defending and restoring certain of the financial prerogatives of the House. The passage of the Bill is in compliance with the traditions of the House of Commons. Surveillance and command of the Executive are our historic duty and if we do not insist on that we stand for nothing. For too long, we have allowed the Executive a virtual monopoly of authority and a virtual immunity from careful scrutiny. We have pretended that it has an omniscience and a faculty of judgment that harsh experience has continually belied.
Therefore, we have made a start in this Parliament on restoring our ancient and hard-won rights and to do our duty better—a duty that our people trust us to perform and that we have so often so carelessly failed to do. For instance, it is a scandal that we have in the past voted the expenditure of hundreds of millions of pounds on the nod, without examination. In this ambition that we Bank Benchers profess, we are right to say that we shall no longer be denied. In the campaign for reform, I pay tribute


to the hon. Member for Norwich, South (Mr. Garrett) who has played a great part in awakening us to what needs to be done. That campaign cannot be denied.
This is a House of Commons matter, but my right hon. and learned Friend the Chief Secretary, whose presence on the Front Bench we all appreciate, should remember the pledge that the Conservative party gave to the electorate in 1979, which was clear and specific:
We sympathise with the approach of the all-party parliamentary committees which put forward proposals last year for improving the way the House of Commons legislates and scrutinises public spending and the work of government departments. We will give the new House of Commons an early chance of coming to a decision on these proposals.
Until today that pledge has not been fully honoured. My right hon. and learned Friend has therefore a heavy moral responsibility to assist the passage of the Bill in accordance with that crystal-clear undertaking.
I should like to outline the history of the proposals to reconstitute the Exchequer and Audit Department in a modem form and to adapt its remit to contemporary circumstances. Three times, Select Committees of the House of Commons have recommended reform not only in the instance quoted by the right hon. Member for Heywood and Royton, but in 1978, 1981 and 1982. Three times, the Government's response was casual.
In 1978, during the last Parliament, I was lucky enough to win the ballot for a motion. A debate followed and I was supported by the present Leader of the Opposition and the then chairman of the parliamentary Labour party. Again the Government did nothing. In this Parliament, as the right hon. Member for Heywood and Royton will remember, the report of the Public Accounts Committee to which he referred was debated. The Government's response was so inadequate that a storm of protest followed which was exemplified by a motion on the Order Paper signed by some 300 hon. Members. Still nothing was done.
All my life, the power and authority of the Executive has grown. The great political debate in our nation and in this Chamber and the great political divide in our society is about where the frontiers should be set. All can and do agree that wherever that is decided someone or some body must report to our people how well, how competently, how efficiently and how honestly that power and authority is used. That, I swear, is Parliament's task. Who better to discharge it than our people's elected representatives? We cannot and should not escape and nor should we delegate our responsibilities.
The state is now society's biggest employer, directly and indirectly. Its taxation and spending are at record levels. Whole sections of our community depend upon Ministers' decisions for their very standard of life. All the while, the power of the parties has grown, the volume of legislation increases and Prime Ministers become more like presidents.
A gross imbalance has grown between the power of the executive to initiate expenditure and the opportunities for the legislature to examine how it is spent or to control it. Parliament, of course, must be always mindful of its duty to sustain effective government. That has never implied, and should not imply, dumb acquiescence in all their proposals, a slavish following wherever they lead. Constructive criticism, a comparison of policy alternatives and outturn with forecasts, scrutiny, questioning,

evaluation of purposes and achievements, as the right hon. Member for Heywood and Royton said, the harnessing of expert advice and value-for-money auditing are the function of the House of Commons.
We all know that our machinery, adequate enough in ancient days, is no match for today's complex position. When half the state's revenue is handed out blindly to bodies which are not accountable for its use, it is time to worry.
All that I seek, and I believe it to be an entirely proper aim, is to afford the wretched, hard-pressed taxpayer some slight protection against waste due to incompetence, faulty policy or misjudgment; to give him better value for money as standard practice. That is what the man in the street expects.
With regard to the discussions that we have already had about the nationalised industries, I have noted with astonishment the comment by persons prominent in some state-owned industries that they may resist this endeavour. I am tempted to comment, as the man in the street might, "What impertinence." I believe that we have long attached undue weight to the susceptibilities of management and insufficient weight to the public interest in the efficiency of management.
By all means let us opt, as my right hon. Friends in government so often, and I think correctly, say, for managerial autonomy. There is and will always be a corollary; and that is proper accountability.
I wish that the British state-owned industries were invariably the most efficient, but they are not. Everyone knows it and wants something done about it. The original reason for nationalisation, if one looks back at the previous debates in the House that some of us remember, was to achieve accountability of powerful management. It was the Labour party's honourable and declared aim. It was not achieved in those post-war years. If one reads those debates, it is remarkable to see how the arguments against achieving it parallel precisely those that we are hearing now from heads of state-owned industries and their supporters.
We have now a second chance. It is splendid, if I may say so to my friends in the Labour party, that they are as determined as many of us on the Conservative Benches that we should take that second chance.
I do not understand why my right hon. and learned Friend the Chief Secretary to the Treasury and other of my right hon. Friends who are members of the Cabinet are willing to agree to the investigation of the nationalised industries by the Monopolies and Mergers Commission—a body in which I do not have too much faith—but not to parliamentary inquiry. Audit, whatever its style, as my right hon. Friend the Member for Chelmsford said, should be totally independent of the Executive. The Monopolies and Mergers Commission is not.
French state industries, banks, and so on, are subject to an audit body. So are those in the United States, Sweden, Austria, Israel and many other countries. What is so special or different about the United Kingdom? Are our state-owned industries such paragons of competence and such leaders of efficiency? Are they equally such paragons in man management, innovation and profitability that they should be exempt? They are not. The proposal is ludicrous.
I believe that the British chairmen, whom I greatly respect as individuals, much misunderstand, as my right hon. Friend the Minister for Chelmsford and the right hon.


Member for Heywood and Royton have pointed out, and greatly exaggerate the effects of modern audit, which would often be helpful and constructive. One has read some extraordinary things in the newspapers. If a man wishes to resign rather than be accountable for his expenditure of public money, the taxpayer should let him go gladly. Ministers may be susceptible to threats—it is what we expect of them and it is how they are—but not the House of Commons. If there are misunderstandings or snags they can be ironed out easily in Committee.
Looking back to previous days in the House, it is worth reflecting that in 1946 there was a proposal to submit the coal board's accounts to the Comptroller and Auditor General for examination and report. It was defeated in the House. That was a great pity. It is time now, 37 years later, to make amends.
When the establishment of a Select Committee on Nationalised Industries was first proposed in 1952, Mr. Herbert Morrison, that great man, said that such a Committee would create "a rather unnerving prospect" for the managements. Lord Reith, whom we all remember, even declared that it would be terrifying to the corporations. It is remarkable how these old arguments pop up again. Nevertheless, the House took the decision, rightly, to establish the Select Committee in 1956. It is a pity that its request for the aid of an officer of status roughly equivalent to that of the Comptroller and Auditor General was refused. Even so, nearly 30 years later, it is generally agreed that the Committee was a success and its demise is regretted, not least by the nationalised industry chairmen whose predecessors opposed its establishment. I dare say that history may repeat itself if the Bill is fortunate enough to pass through all its stages in Parliament.
In 1968 that Committee made an excellent case for an efficiency audit of the state enterprises. It will be agreed by all hon. Members, whether they like the Bill or not, that the implementation of that recommendation is long overdue.
Precedents for action today are even older. The old colonial audit function, which predated the Exchequer and Audit Department Act 1866—the Act is often cited as a model—was comprehensive. The remit that was based on the old Exchequer system embraced efficiency and effectiveness as well as regularity and economy. It is interesting to note that the present United States system derives its success from this old ancestor. So should our contemporary practice.
That is the challenge of the Bill. If we rise to it now, years later than perhaps we should have done, and billions of pounds of expenditure later than should have been the case, we may merit some small public approbation. I do not know about that. If we do not, we shall certainly deserve strong criticism—contempt, perhaps. Our duty is effective stewardship of our nation's affairs, especially its finances and their direction. We must never neglect it. I hope with all my heart that the House will strongly support this attempt to be loyal to that necessity.

Mr. John Garrett: I little thought that when I first became concerned about the need to reform our state audit system in 1968 and first began to write about it in 1970, together with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who is sitting on the Front Bench, that within 15 years the

House would be considering a legislative proposal in this sphere. The campaign was a lonely one at first. I was its only member for a decade. Since then, however, many others have joined and it is clear that this is an idea whose time has come.
I congratulate sincerely the right hon. Member for Chelmsford (Mr. St. John-Stevas) on the Bill. It is of the highest constitutional importance in the enforcement of public accountability. Basically, it has turned into a battle for power between the Back Benches and the Front Benches. That is what it is all about. I am glad that the Opposition Front Bench support the Bill. Of course it should. It is Labour party policy. It is also Conservative party policy. One of the elements in the Conservative party manifesto at the last election, to which the right hon. Member for Taunton (Mr. du Cann) referred, was that the Conservative party wanted to see improvements in the way that Parliament
scrutinises public spending and the work of Government Departments".
The right hon. Member for Chelmsford has given the Opposition Front Bench the opportunity to implement its own policy. I thought at first that the Bill might have been planted on the right hon. Member by the Opposition Front Bench. It should clearly have a hard job in showing why the Bill should be opposed.
The sponsorship of the Bill shows how widely the Bill is supported by both sides of the House. Since I first raised the issue in the early 1970s there have been improvements in the state audit system, in the role of the Comptroller and Auditor General and the Exchange and Audit Department that he heads. I pointed out at the time—it is still true to a large extent—that ours is the weakest and most Executive-dominated state audit in the Western world. The Treasury usually provides the comptroller from its higher staff and he is nominated by the Prime Minister, who is First Lord of the Treasury. It is clearly an unconstitutional position, where the Comptroller and Auditor General is nominated by the Executive.
The Treasury fixes the numbers and grades of the Exchequer and Audit Department staff. The staff join the Department as A-level school leavers and require no professional qualifications. Their status is far inferior to other state auditors throughout the world, who are generally graduates, and, in France and the United States, more often than not postgraduates. It is still true that in this country the status of the auditors is inferior to that of the people whom they are auditing. The grade of entry to our Exchequer and Audit Department is still that of the A-level school leaver, although many of them nowadays have degrees.
The Treasury fixes the form of the accounts to be audited. Hon. Members know how uninformative these are. The auditors, originally set up to look for fraud, have, over the years, moved into looking for waste and extravagance, whereas other state auditors have gone much further into examining efficiency and, above all, the effectiveness of public spending. The auditors cover only half of public expenditure. When our state audit system was set up, Supply was all public expenditure. Gladstone set up the Comptroller and Auditor General to look at Supply. Today, however, Supply represents only half of public expenditure. This means that half of public expenditure is not examined by our constitutional audit.
Our Exchequer and Audit Department has become a backwater, forgotten by this House for decades. A supine


House of Commons has allowed this great instrument, fashioned by Parliament in 1866 for parliamentary control, to be taken over by the Treasury and to be blunted. Gradually, over the years, more hon. Members became interested in the issue. From 1978 to 1982, four Select Committees—Expenditure, Procedure, Treasury and at last Public Accounts—called for the reform of our state audit arrangements. An early-day motion calling for reform was signed by 300 hon. Members.
Over the years, the Treasury gave a little. After 1975 our auditors were required to obtain professional qualifications, and two years ago the Prime Minister announced that the Chairman of the Public Accounts Committee would be consulted, but no more, on the appointment of the Comptroller and Auditor General. The Exchequer and Audit Department started to do value-for-money audits, not just financial audits. It still did not carry out audits on the effectiveness and efficiency of the spenders of state funds on a general scale.
The Treasury has resisted the two great changes that are necessary. The first is that the Comptroller and Auditor General and his staff should once again be Officers of this House. They were originally intended to be Officers. Secondly, the Comptroller and Auditor General should inquire into the use of public money, wherever it goes. The Bill goes a fair way towards providing for those changes. It does not by any means go all the way. It would, however, provide a useful start. I think that its title should be "Parliamentary Control of Expenditure and Revenue Reform Bill." There is no reason why the House should not inquire into the efficiency and effectiveness of the management of the revenue-raising Departments, a subject on which hon. Members know relatively little.
The Bill establishes that the Comptroller shall be appointed by the House of Commons and that his staff in the proposed National Audit Office shall be included in an Estimate approved by the House. In providing for this change, there is no doubt that the Bill proposes to enact Gladstone's reforms of 1866. Lord Beloff has written in The Times that Gladstone stated in 1855 that the House of Commons should not be entrusted with the state audit system. Gladstone may have said that in 1855, but the record is clear. It is that what in this Bill we are seeking to change was then passed by the House. In the House of Commons debate on 1 March 1866 Gladstone made it clear that the reason why he was recommending the amalgamation of the posts of Comptroller of the Exchequer and Chairman of the Board of Audit into a single post of Comptroller and Auditor General was to enable Parliament to complete the last portion of the circle of control, that is, to verify that Government spending was used for the purposes authorised by Parliament.
The Bill of 1866 took a strange Standing Committee form. It went to the Public Accounts Committee, established as a Standing Committee. On the Standing Committee the Comptroller and Auditor General of the day, Sir William Dunbar, suggested to Mr. W. G. Anderson, the principal officer of the Treasury concerned with the Bill, that it should be made clear that
An examination of the accounts should take place for the House of Commons and according to such rules as the House of Commons might prescribe".
The Comptroller of the day was suggesting to the Treasury that the House of Commons controlled the

exercise. Mr. Anderson, speaking for the Treasury, replied that the insertion "would hardly be necessary". The reason was that the Treasury wished to leave itself a loophole by which it could get around the powers of the House of Commons in respect of the state audit.
Over the years, Comptrollers and leading parliamentarians—I have given a memorandum to the Public Accounts Committee on this matter—have made it clear that the Comptroller was intended to be an Officer of the House. In evidence to the Select Committee on National Expenditure in 1903, the Comptroller said:
I am a Parliamentary officer whose duty it is to certify the correctness of the accounts as rendered, but further I am directed by the Act to report to Parliament.
Lloyd George, then Chancellor of the Exchequer, said:
The Act appointed the CAG as an Officer of the House."—[Official Report, 17 April 1912; Vol. 37, c. 371.]
But mosts interestingly, during the debate on what became the Exchequer and Audit Departments Act 1921, which revised the 1866 Act, the Financial Secretary to the Treasury said:
As the House is aware, the salary of the CAG is paid, not out of Votes, but out of the Consolidated Fund, and that is done in order to mark the exceptional independence, freedom and dignity of the position of this great Officer of the House of Commons."—[Official Report, 5 August 1921; Vol. 145, c. 1886.]
The Procedure Committees of 1932 and 1946 both referred to the Comptroller as responsible to the House. By 1977 things had changed. In 1977 the Comptroller said to the Expenditure Committee:
I am, of course, totally independent of Parliament
and that the Exchequer and Audit Department
is independent of all other public departments … but at the same time it is an important instrument of the Treasury.
Gladstone must have been revolving in his grave by then. He added that
the harmonious action and mutual support of the two departments are essential to efficient financial administration.
He went on to say that the harmonious administration depended on the close co-operation of the Treasury and the Comptroller.
I have already shown that the Comptroller was supposed to be an Officer of the House, scrutinising the Treasury. By then, of course, the Treasury had given the game away. It said:
The CAG's relationship to Parliament derives from the fact that most of his reports are presented to Parliament and he has by long practice established a close link with the Public Accounts Committee at which his formal status is that of witness.
So, in 110 years, we have moved from the Comptroller and Auditor General being a great Officer of the House to being simply a witness before the Public Accounts Committee.
In the Government's observation on the report of the Select Committee on the Treasury and Civil Service, we really have a classic example of their attitude to the Comptroller. In one line, they state that the CAG
as an independent officer, displays his resources as he thinks fit".
But in another line, they state:
The Government do not consider it would be appropriate for the CAG to use his powers on behalf of other Select Committees.
The fact of the matter is that our state audit system was hijacked over the years by the Executive, and it is time that we took it back.
The Bill is modest on the scope of audit. It simply brings into audit nationalised industries and any company more than 50 per cent. publicly owned. It does not go so


far as the four reports from the Select Committees proposed, all of which said that the auditor should have the power to follow public money wherever it goes. Here it falls short of what other state auditors can investigate and, as I have shown already, falls short of the original intention, because the Comptroller was set up to study Supply. In 1866 all public expenditure was Supply, and now only half of it is Supply. The Bill will go a long way towards closing that gap, but not all the way.
In the past few weeks we have heard shrieks of rage from the chairmen of the nationalised industries, stoked up by the Secretary of State for Industry. Their position is that they are willing to have their enterprises examined by the Monopolies and Mergers Commission, under the direct control of the Executive, but are not willing to have their operations examined by the Comptroller and Auditor General on behalf of Parliament. That says a lot for their sense of public accountability.
I have met some of the chairmen, with the promoter of the Bill, and I was amazed at how little they understood about parliamentary control and the rights of Parliament. At the moment some of the chairmen of nationalised industries are telling Conservative Members that privatisation will be hindered if they are examined by the Comptroller, and they are telling Opposition Members that it will inhibit public enterprise.

Mr. Prescott: Their remaining in office will.

Mr. Garrett: It is rich for the chairman of the British Steel Corporation to moan about the examination of his enterprise by the Comptroller and Auditor General under these new arrangements, let alone that his own position and remuneration need public examination, because he comes from a country whose comptroller can follow every red cent of public money all the way down into a private steel company, and frequently does. The Bill goes nothing like as far as the American equivalent. The American comptroller turns over private companies that are in receipt of money from the state, yet the chairman of British Steel has the nerve to lecture us about being interfered with by a parliamentary Comptroller and Auditor General.
As the right hon. Member for Chelmsford said, the Bill removes any risk of a double layer of investigation, since the powers of the Monopolies and Mergers Commission are taken away. I know that the Chairman of the Public Accounts Committee, my right hon. Friend the Member for Heywood and Royton (Mr. Barnett), will always use his powers with regard to nationalised industries sensibly.
The present Comptroller has sent us a memorandum outlining the ways in which these powers would be used. Make no mistake about it: the House of Commons creates nationalised industries, is ultimately responsible for nationalised industries and the House of Commons must have powers to scrutinise them. It is as simple as that. It is a simple constitutional point, whatever the Government Front Bench thinks.
The Treasury and the Department of Industry will try to stop the Bill by any means fair or foul. I hear that they may say that it is improper for the Crown to appoint an Officer of the House. The answer to that is that the House did so for decades, when it was widely believed that the Comptroller was an Officer of the House.

Sir John Biggs-Davison: rose—

Mr. Garrett: The Treasury is worried that at the moment the Exchequer Audit Department is cash limited

and that if it is moved under the control of the House of Commons it cannot be cash limited, because although the Treasury, and I suspect the Leader of the House, would like to cash limit the House of Commons services, they do not dare do so. So, on matters of simple prudence, they think it wrong for this body to be moved outside the cash limit system and into the control of Parliament.
Most of all, the Government are terrified of the House of Commons flexing its muscles. This is an opportunity, at last, for the House of Commons to take just a little power back from the Government. The House should take much more power from the Government. We have less power now than we had centuries ago. It is time we said that we want to force accountability to Parliament. The Bill says it.

Sir Donald Kaberry: I join in the congratulations to the promoters of the Bill for giving us all the opportunity to discuss parliamentary control of expenditure. I do not wish to introduce too sour a note of discord into the mutual congratulations that have been flying about one to the other so far, but I believe there is a little more to be said about parliamentary control of expenditure. To use phrases such as "Give back to the taxpayer" or "Give back to the House the power to control expenditure" rather overstates the position.
I yield to no man either in the Chamber or outside in recognising the necessity to control the expenditure of public money. I especially recognise that in the realm of nationalised industries and public companies in which the Government either have the whole shareholding or the majority shareholding. It is a long list, even today, and it covers the employment of hundreds of thousands of our fellow citizens. It covers the production of many of the essential services to industry and it provides adequate cause for all hon. Members to take care that they spend our money carefully and wisely.
I say that with some confidence because I look upon it immediately as the task of all 635 Members of Parliament at all times to be careful in watching the expenditure of public money. The individual Member can control that expenditure extraordinarily well by many simple processes, such as questions either oral or in writing, by Adjournment debates, by ministerial inquiries, by inquiries outside the House, and the more up-to-date example of the excellent pursuit by the hon. Member for Batley and Morley (Mr. Woolmer) over the alleged wrongful expenditure of public money in Yorkshire. I am glad to know that the papers about that case are now with the Director of Public Prosecutions for further consideration. That is an example of what one hon. Member can do.
At the risk of introducing a selfish note, I recall more than 32 years ago, before we had any Committees—indeed before any of the Members present today were in the House—pursuing a matter by that process that resulted in the prosecution at Leeds Assizes of a chairman of a nationalised industry's board. I had not envisaged the final outcome, which was that the chairman was sent to prison for six months and the local authority was fined £20,000 with costs. Thirty two years ago, £20,000 was worth much more than it is now. That shows that hon. Members can pursue such matters and can stop waste.
Unless it be thought that what I shall say may show that I have a brief from the chairmen of the nationalised industries, let me make it abundantly clear that I do not.


My relationship with the chairmen of nationalised industries has always been at arm's length, and my arm is pretty long. I have seen them on the other side of the table for many years, first on the Select Committee on Nationalised Industries and, more recently, on the Select Committee on Industry and Trade. They are not the peculiar creatures about whom stories have been told this morning. They are honest administrators who are anxious to carry out their duties and to ensure that public money is not wasted. Of course, we examined them in the greatest possible detail. We question them about all that they do, and we demand the details of their accounts. A few years ago, one chairman of a nationalised undertaking hesitated to provide the Committee with a set of more detailed figures than he had provided. We went to the final process, and the Serjeant at Arms, on behalf of the House, commanded the chairman to deliver those figures. They were delivered. Subsequently, a debate took place in the House about the British Steel Corporation.
Powers exist to achieve the many objectives about which hon. Members have spoken. I am worried about the nature of the additional inquiries that will come on top of the existing powers of the House. I ask myself the serious question, what will be the effect upon the type of person who can be attracted to take on the chairmanship of a nationalised undertaking? Do we want men who can command, take commercial risks and make commercial judgments, but who are not subject to someone leaning on their elbow all the time to ensure that they are doing the right thing? From the picture being painted today, for example, if the job were offered to me on a golden platter at £100,000 a year tax-free, with the additional restrictions that would be placed upon my commercial judgment, I should gladly refuse. I am worried about attracting people to take command and about the person who will carry out the checking.
What has been said so far is only half the story. Recently the Comptroller and Auditor General wrote to my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas), when he freely admitted that at present his Department had no knowledge of commercial undertakings. He said:
Since my Department would have to acquire new knowledge and to develop forms of enquiry and report best suited to the particular circumstances of the bodies and companies … 
In paragraph 12 of his letter, having assumed that he has the right people and trained them, he said that his inquiries will be
undertaken by staff with suitable industrial or other qualifications and experience.
The Comptroller and Auditor General interprets his duties, if this Bill became law, by saying:
I should expect, for example, to examine material prepared for corporate plans, periodic financial and costing data, the output of management information systems, minutes of meetings and various other internal information sources.
He envisages someone sitting in the office all the time. A group of offices would be put on one side for the Comptroller and Auditor General, and those who must make commercial judgments will be looking over their shoulder down the corridor worrying about what will happen to their decisions, because the Comptroller and Auditor General will be examining their periodic costing data.

Mr. Joel Barnett: Perhaps the hon. Gentleman is not aware that in a large public company offices are set aside for the auditors of that company. They would be there for much of the year asking questions about any financial irregularities. Why is it all right for shareholders in a private company to have that, but not for the House of Commons to be represented in that way?

Sir Donald Kaberry: That process exists now with the individual auditors and accountants of the nationalised undertakings. Each year they check every dealing of the nationalised undertaking and they certify on their accounts what they have done or what they have not been able to find out.
The difference with the activities of the Monopolies and Mergers Commission, which has been derided so far by implication, is that the commission is manned by people who are accustomed to commercial methods. The right hon. Member for Heywood and Royton (Mr. Barnett) shakes his head, but the commission has carried out its duties very well. The commission, in turn, is subject to examination in detail by the Select Committee on Industry and Trade. The commission is on the list of bodies to be considered as soon as practicable about how it conducts its affairs, and a full and detailed report will be published thereafter.
So far the commission has published reports on six matters—the inner London letter post; British Rail's London and south-east commuter service; the Central Electricity Generating Board; the Severn-Trent water authority; four bus undertakings; and the sewerage functions of the Anglian and North West water authorities. We are awaiting reports on Caledonian MacBrayne and the National Coal Board; and currently under investigation once more is the Yorkshire electricity board and the air traffic service of the CAA. That is 10 in all. They are excellent reports and provide hon. Members with all the information that they want on those subjects.
I am worried about those controls that have not been referred to at all this morning. It is as well to remind ourselves what powers the House now has over our nationalised undertakings and their associated and other bodies. First, through its chairman, a board is subject to the control of what is known as the sponsoring Minister. For years that was always believed to be some cosy relationship on old boy terms—a delightful network in which somehow a board's chairman always got his way with a susceptible Minister. Having sat on the Select Committee on Nationalised Industries for years, I can say that that is arrant nonsense. There is a proper commercial understanding between the two. The Minister leaves to the chairman of the nationalised undertaking those matters that were defined long ago—as we were reminded this morning—by the late Mr. Herbert Morrison in the House. The chairman and the board deal with the day-to-day administration and matters of commercial judgment. The Minister deals with the Government's broad policy in relation to the undertaking. That is the first check upon nationalised undertakings.
The Select Committee on Nationalised Industries was murdered at the beginning of this Parliament. It was ruined completely. In its place were put departmental Select Committees which are discharging their duties adequately and well. In a recent report to the House from the Liaison


Committee it was specially noted that they were making a great contribution to the House by informing hon. Members of what was going on.
The Select Committee on Industry and Trade has the oversight of some seven nationalised undertakings and we make many recommendations to the House. I wish that they were debated more often. The lack of interest in our control of nationalised undertakings sticks out a mile. I hope that in future more time will be given to such matters. We do not always accept ministerial replies to the suggestions that we put forward. For example, we made an interesting report last year upon the workings of the Post Office. It is on its own. We made many strong recommendations and congratulated it in many ways. We feared the dead hand of the Treasury on the advancement of the Post Office. In fact, when we received the ministerial reply my committee sent it back for reconsideration. I hope that it will be reconsidered. I hope that the dead hand of the Treasury will be removed from the workings of the Post Office, but that is purely as an aside.
By their terms of reference the Select Committees have the fullest and widest powers to send for persons and for papers, to examine accounts and reports and to appoint other accountants to examine figures provided to them. We did that in our investigation into the Concorde affair. Accountants were appointed to check the figures supplied by British Airways, which were constantly being altered, perhaps innocently. We did not accept what was said. I once said on this matter that variety is the spice of life—every time we asked for new accounts we had a different set. Finally, we appointed our own accountants and, I hope, clarified the matter. That is an additional check.
Another check is provided by the Public Accounts Committee which is presided over by the right hon. Member for Heywood and Royton. At any time that committee can call before it any undertaking and, from time to time, chairmen and members of nationalised undertakings. From the point of view of Select Committee members, it is a little confusing because sometimes it makes the chairmen of nationalised undertakings or independent companies feel that they are being grilled twice. I think that I am right in saying that the difference is that the Public Accounts Committee looks at money spent whereas the Select Committee is far more objective, looks at policies and the future and seeks to report the details to the House of the way in which particular nationalised industries are proceeding. None the less, that is a third check upon nationalised undertakings today.
I have explained what the Monopolies and Mergers Commission has sought to do since 1980. All that will happen is that the existing controls will continue, but additionally the Bill will in part remove—it is badly drafted and requires a great deal of amendment to make many things clear—the power to ask the Monopolies and Mergers Commission to look at the matters to which I have already referred; and in their stead will be placed the new power of the Comptroller and Auditor General.
I stress another aspect, which I know that the right hon. Member for Heywood and Royton would not wish to deride. The authority's own auditors have a duty, which is carried out honestly and well, to say where an undertaking stands in its expenditure, especially that of public money. If they are not satisfied they can qualify the accounts, as has been done in many instances.

Mr. Joel Barnett: The hon. Gentleman has confused the two different functions. The function of the industry's auditors is to do a financial irregularity audit, which is quite different from what is set out in the Bill.

Sir Donald Kaberry: I am merely making the point, which I am sure the right hon. Gentleman understands, that that is an additional power to check the authenticity, the honesty, of an authority's accounts. We are seeking honest, open administration wherever public money is spent.
I mention two more powers. One is very real and could pose many problems for all our nationalised undertakings in the future were the present litigation against the British Airports Authority to be successful. I do not know how many hon. Members fully appreciate that litigation is pending, brought by 14 international airlines, against the British Airport Authority which, if it were successful, would mean that millions of pounds of fees since 1976–77 would be repaid.
The case questions the whole of the authority—the Ministry in this country—giving directions to work within certain financial limits. It questioned the authority as to how it made such profits in its administration of the undertaking. Were it to be successful and were there to be an individual rich enough in this country without the backing of 14 problematical, profitable international airlines, it could bring, in future, litigation against many of our nationalised undertakings, charging them with a similar civil offence.

Mr. English: I have been following the hon. Gentleman's speech closely. All that he says about means of control also applies to the United States, France and Sweden. They are democratic countries. They have parliamentary committees, usually with a greater staff than ours. Because they are democratic countries, the rule of law prevails in that one can go to the courts. It is not like Russia. But in all those cases they have, in addition, an auditor independent of the Executive and not controlled by their equivalent of our Treasury. That auditor usually has much wider powers, as my hon. Friend the Member for Norwich, South (Mr. Garrett) said. But private companies and local authorities in the United States—states protected by the constitution—are not worried if the federal money can be followed through their institutions. They regard it as part of the process of government and of efficient government. What is different about British nationalised industries?

Sir Donald Kaberry: The point is that it is the way in which we have sought to control, and do now control, our nationalised undertakings without reference to what may go on. It is a very different system in the United States of America.
All these controls will remain, but there will be substituted over and above that the additional powers interpreted by the Comptroller and Auditor General himself, going in at any time. That fact was glossed over by stating that he would not go in save with consultation with the Minister. What on earth that means I am not sure. It is not consultation and agreement; it is merely stating that he is going in. There is power reserved to him to do anything.
The powers that the Comptroller and Auditor General will have are far too wide in my opinion to encourage anyone to come forward and say "Yes, I will undertake


this very difficult task of being the new chairman" of whatever nationalised undertaking it may be. That is the man about whom I am worried—the man who I want to come forward to volunteer his services to run our nationalised undertakings as commercial undertakings, to make them prosper and give a good service to all our people. That is why I am inclined to say, having studied the Bill with such care as I can, that enough is enough and this is just putting on that extra bit too much to influence someone to move away from a position that we would like him to undertake to help to bring back success and prosperity to all our undertakings.

Mr. Richard Wainwright: The hon. Member for Leeds, North-West (Sir D. Kaberry) continues his long and diligent service to the House in the interface between Government and industry, but, in spite of his great experience, in no way did he convince me that the taxpayer can safely rely nowadays on the amateur tradition of individual Members of this House trying to control these complex matters.

Sir Donald Kaberry: I hope that the hon. Member—my constituent—is not denigrating the efforts of our colleague the hon. Member for Batley and Morley (Mr. Woolmer), who on his own has pursued a matter which is now with the Director of Public Prosecutions.

Mr. Wainwright: Of course not. I hold the hon. Member for Batley and Morley (Mr. Woolmer) in great regard, but just as one rose does not make a summer, so one successful foray every 32 years or so by an amateur Member does not give control over what the taxpayer rightly regards as his own money.
As I think everyone is agreeing this morning, it is very appropriate indeed that this long-needed measure is presented by a former Leader of the House of Commons who successfully instituted our present system of departmentally related Select Committees.
I accept that critics of the measure are entitled to say that it is all very well improving the status, resources and independence of the Comptroller and Auditor General, but what about the transmission of his work to Parliament; what is the transmission mechanism to make proper use of the greatly improved material that we shall get? The answer is that the transmission is through the premier Select Committee of the House, the Public Accounts Committee.
I regard as wholly far-fetched the suggestion by some chairmen of our nationalised industries that, although hitherto the Public Accounts Committee has been a model of careful, impartial and judicious investigation and report, in the future it might change its tradition altogether and become a dangerous maverick Committee to embarrass the commercial success of nationalised bodies. That is very far-fetched indeed, but if they want extra protection they have it in the fact that the Public Accounts Committee no longer stands alone as an important Select Committee. It is buttressed and supported by 14 other Select Committees which have already established a tradition of careful and judicious inquiry, mainly of a nonpartisan nature. They reinforce the standing of Select Committees.
I find the fears expressed by some, although not all, chairmen of nationalised industries very odd. Apparently they are content to have to wrestle with Government but are alarmed that the House of Commons might be irresponsible in its oversight of their work. Goodness me, the chances of a maverick Government are infinitely greater than the chances of a maverick Public Accounts Committee. I find it odd and somewhat hypocritical that some of those chairmen should say that it is splendid being interfered with by Ministers and civil servants but that they dread a more direct relationship with Parliament.
I should also briefly like to remind the House that we have, admittedly in a much lower key, been through all the fuss before. Not many years ago it happened that the Comptroller and Auditor General was given power to investigate directly each of our universities, whereas hitherto he had been stopped as soon as he had dealt with the University Grants Committee.
As we all know, each of our universities appoints its own auditors, as it should, but there was a tremendous fuss from defenders of academic freedom that the arrival of the Comptroller and Auditor General in each of our universities to look at the books was a serious and direct threat to academic freedom. No less a figure than the then Master of Trinity, the late Lord Butler, with all his authority, raised a tremendous fuss in debate in the House of Lords.
The sort of worry that was expressed was that this interfering official, lacking any sensitive idea of a university, would come forward with some such allegation as that the professor of Greek poetry had only an erratic attendance of two at his lectures and that that was cost-inefficient and the appointment should be terminated. Nothing of the sort happened. Since the Comptroller and Auditor General started investigating each of our universities, there has been no further fuss and one or two vice-chancellors have said that they welcome the additional financial discipline that he effectively provides.
The fact is that, in enforcing accountability, which is a central job of the House, we are now realising at last that in this complicated age, when the industrial cycle of planning and budgeting extends over far longer than the life of one Parliament, we cannot any longer do so by judging the actual results of nationalised industries. The results which they present to the House in their reports are largely the results of chairmen and directors long since decorated and retired. We cannot regard reports from nationalised industries as an effective means of assessing their performance.

Mr. John Wells: The hon. Member is one of the Bill's supporters. If the Bill is passed and the Comptroller and Auditor General is given new functions and greater powers, will his existing powers, such as examining the universities, wither away? Since the universities are funded from other sources, will they no longer be subject to the same scrutiny?

Mr. Wainwright: I understand that the CAG's audit of universities will continue. That example is a harbinger of what is proposed and will extend to other public bodies which receive public money in the same way. The precedent, which I maintain is successful, will be widened if the Bill is passed.
I anticipate a possible criticism. Some people are rightly desperately frightened of adding to Britain's


appalling bureaucracy. They may ask why we should add another audit when the public bodies are already efficiently audited by professional firms. The success of an audit depends on the angle from which the auditors are required to look and the instructions for the scope of their work. Only a foolish auditor would accept the audit even of a tennis club without precise instructions as to the kind of audit that his client was asking him to perform.
Hon. Members who have more experience of auditing than I had before entering the House will know that many large companies with a hard-nosed approach to overhead expenditure gladly employ at least three sets of auditors. First, they employ qualified internal auditors who act for local management. Secondly, they employ a local audit of a subsidiary to provide reassurance to the main board that a subsidiary hundreds of miles from the centre is properly accounted for. Thirdly, a group audit is conducted for the shareholders by another professional firm. That system is accepted in business as being valuable and well worth the fees involved.
Auditors of nationalised industries do not audit for the benefit of the taxpayer or the House. I shall content myself with a brief example. Some years ago I tried to compare the results of some of our nationalised industries. I was thwarted, because some nationalised industries approach the problem of inflation accounting by a form of current cost accounting; some were content with the old historic cost accounting; and some went to the ultimate by operating replacement cost accounting. That makes fruitless efforts by the House to compare one industry with another.
When I asked Ministers if they would get together to require a common form of accounting, they said that they had no powers to do so. When I suggested that all nationalised industries should have the same auditor so that at least the same convention was applied, I was reminded, correctly, that it was not up to the auditor to impose a particular set of conventions on an industry. The only way to achieve a common basis of accounting for the House to use is by allowing intervention by the Comptroller and Auditor General.

Mr. Robert Maclennan: Does my hon. Friend accept that his case was given substantial support by Ian Hay Davison, the chairman of the Accounting Standards Committee, in a powerful speech in September last year in which he drew attention not only to the variations in standards between the public corporations, but to the fact that there was ministerial intervention from time to time to set aside standards in industry? He said:
The relevant Secretary of State can, and usually does, dictate the form of accounts, and I suspect it would not be unfair to say that private sector accounting standards are tolerated as long as the Treasury, and the sponsoring Departments, do not find them inconvenient. Ministerial power could be, and has been, used to set aside an accounting standard in the interests of public policy.
The Bill will enable the House to tackle precisely such a situation.

Mr. Wainwright: I am obliged to my hon. Friend for illuminating my argument by using an important authority, Mr. Ian Hay Davison.
The chairmen of nationalised industries and some other critics fail to understand one of the first principles of auditing which is drilled into the minds of students of accountancy and auditing in their first few months of study. I refer to the famous judgment in an auditing case

when it was settled and has never been unsettled, that an auditor is a watchdog, not a bloodhound. It was settled that it is not part of the auditor's job to sniff out possible inefficiencies or irregularities. An auditor conducts an inquiry when a possible source of irregularity or inefficiency comes to his notice. In that sense he is a watchdog. Taxpayers have long suffered from the inadequacy of our present watchdog and I therefore warmly commend the Bill, which will give the taxpayer greater protection.

Mr. John Peyton: It is with some regret that I oppose the Bill and as a result enter courteous conflict with the Bill's distinguished parents. I regret that my right hon. Friends the Members for Chelmsford (Mr. St. John-Stevas) and Taunton (Mr. du Cann) are no longer in their places.
My right hon. Friend the Member for Chelmsford referred to the headline:
Norman deserves to conquer with his Bill.
I hope that my right hon. Friend will reflect with a measure of caution, if not shyness, upon the fate which overtook a later Norman king who died through eating a surfeit of lampreys. I hope that my right hon. Friend will not find that he has bitten off more than he can chew.
I am glad that the Bill's supporters believe it wise to curb the power which they originally sought to take on behalf of Parliament to follow public money wherever it goes, but I wonder whether we can rely upon such restraint being continued. I believe that instead there will be pressure to extend the measure even during its passage. There is nothing in the long title to exclude such amendments.
My right hon. Friend the Member for Chelmsford said that it was unfair of people not to accept the benefit of an efficiency audit. He said that it would be a help. We must bear in mind that it is possible to have too much of a good thing. I agree with much of what my right hon. Friend said, but I am not happy about the method to be adopted.
The right hon. Member for Heywood and Royton (Mr. Barnett), who at present occupies the Chair of the Public Accounts Committee with great distinction, said in a comforting and reassuring way that he understood the worries of those people who had doubts about what would happen, especially the chairmen of nationalised industries. He said rather blandly that he did not think that their worries were well founded. He said that they had nothing to fear and that there would be extensive consultation with the sponsor Department—the Comptroller and Auditor General. I am uncertain how much those people who are anxious about the Bill will feel comforted by such consultations. My experience leads me to believe that there is not much love lost between sponsored Government Departments and the industries for which they are responsible.
My right hon. Friend the Member for Taunton, to whom I extend a most cordial welcome now that he has returned to the Chamber, is a friend of long standing and my immediate neighbour in Somerset. It is, therefore, with even sharper regret that I find myself disagreeing with him, although I agree with much of what he said. I am not quite sure why he regretted that this was not a Government measure. It is unlikely that any Government would try to immolate themselves in the way that he suggested. It is


extremely unlikely that a Government would sponsor such a measure. I thought that he was a little sanguine in his expectation that they would.
My right hon. Friend the Member for Taunton rightly complained that we have allowed the Executive considerable immunity. I wonder how the Bill will improve things. I see a danger of it making things worse. The report for which he called ought to start much closer to home—in the House and our procedures. There is no doubt that the power of the Executive has grown, as my right hon. Friend complained, but I do not believe that Parliament plays an effective part in curbing that power. It contributes an excess of harassment to the already difficult task of government. I also reflect on the fact that the House needs considerable guidance before it comes to even the most domestic and intimate decisions, such as when it goes to bed at night and when it will go on holiday.

Mr. Budgen: And how much we are paid.

Mr. Peyton: My hon. Friend the Member for Wolverhampton South-West (Mr. Budgen) may make that point. The House of Commons is slow to reach decisions on its own. We all know the bewildering experience of free votes when there is no kindly guidance from the Whips to show us which Lobby is appropriate.
The hon. Member for Norwich, South (Mr. Garrett), who I am sorry is no longer with us, saw the Bill as a struggle between Back Benchers and Front Benchers. I do not see it as anything of the kind. I have spent far longer on the Back Benches than I ever spent on the Front Benches and I am inclined to side with the former. I was struck by the hon. Gentleman's suggestion that opposition to this measure had been stoked up recently by my right hon. Friend the Secretary of State for Industry. That is a fanciful idea. My right hon. Friend has been in Japan. Although I am the first to salute his undoubted qualities, I doubt whether he is much of a stoker-up of opposition.
My hon. Friend the Member for Leeds, North-West (Sir D. Kaberry) rightly observed that surveillance can be overdone. He rightly and fairly commented on the lack of interest that the House takes in the numerous Committees that it spawns and in their activities. I agree. I have always wondered at the amount of time that is spent by intelligent and distinguished Members who carry out deep inquiries and produce learned reports that receive scant attention from the House.
The hon. Member for Colne Valley (Mr. Wainwright) made an extraordinary remark. He said that the chairmen of nationalised industries should take comfort from the fact that the Public Accounts Committee is not the only Select Committee of the House, but that there are some 14 others. I do not believe that equal misery is a cordial that the chairmen of nationalised industries will find helpful.
I am sorry to see that my right hon. Friend the Member for Saffron Walden—[AN HON. MEMBER: "Chelmsford."]—for Chelmsford has departed again. I had forgotten his source and am unaware of his present whereabouts. He has earned our gratitude to the extent that he has conferred upon us the unusual opportunity to reflect on our own procedures as opposed to those of other people. We are expert on, and spend a great deal of time considering, the follies of other people's procedures but we give little attention to our own.
I have long been of the opinion that an outsider could not be blamed for concluding that our procedures were designed for the express purpose of fostering inefficiency and creating confusion. Of course, that would be an unfair and prejudiced conclusion.
Our procedures suffer greatly from well-intentioned, ad hoc and ill-considered reports. There is layer upon layer of them. I fear that the Bill is just such another. It will give extensive powers to the Comptroller and Auditor General to investigate the economy, efficiency and effectiveness in the use of resources. Quite how he will impose a real boundary as opposed to a verbal one between those things financial and those to do with regularity I am not quite sure. Nationalised industries and other public sector bodies that are principally supported by moneys provided by Parliament, such as health authorities, will be subjected to fairly extensive examination.
The Chairman of the Public Accounts Committee—I repeat that I have always respected those who have held that office—is to undergo something of a sea change. He will become an extra-parliamentary body, if not an extraterrestrial one. His life will be continued after the dissolution of Parliament. He, and he alone, will be able to move for the appointment of a Comptroller and Auditor General. The Comptroller and Auditor General will be the head of the National Audit Office.
I shall refer later to the letter that my right hon. Friend the Member for Chelmsford received from the right hon. Gentleman and thoughtfully circulated to his colleagues. I am not sure whether that letter does a great deal to strengthen my right hon. Friend's case or whether, to a certain extent, it undermines it.
I should like to have asked the right hon. Member for Heywood and Royton about clause 12. I am not sure what it is intended to achieve. I am not sure whether it could cover a wider purpose than it appears to cover at present. I hope that in Committee he and my right hon. Friend the Member for Chelmsford, who by that time will have had the opportunity to read my remarks, will be able to explain the purpose behind clause 12 and satisfy us that there is no sinister purpose behind it.
I accept without question that inefficiency, incompetence and waste are grave defects, particularly in government. It is hard to root them out. However, it is one thing to recognise evils and another to cure them. Before the House passes the Bill or even gives it a Second Reading, we should ask ourselves some questions. I am sorry that my right hon. Friend the Member for Chelmsford has not addressed himself to them. How far is it reasonable to hope for a cure from the Bill? What price will we have to pay for that cure? What likelihood or danger is there that we shall make things worse rather than better?
I do not speak often, but this is the second time in one week that I have had cause to reflect in the Chamber on the dangers of too much inquisition. We are much given to it. I personally have long believed that those who set up inquisitions and those who carry them out seldom have a glimmering of an idea how much impact those inquiries have upon those who are concerned with answering and replying. Such inquiries involve an enormous expenditure of time and management effort. I do not believe that those who initiate them have more than a cursory idea of that.
There is at least a danger that a reaction to the Bill will be that people will be more careful, not in the sense of being prudent in the handling of public money, but in the


sense of being more cautious and slow to decide. They will be particularly careful to see that they have available a set of immaculate records that are designed not in any way to improve the efficiency with which the business is conducted but to be put on the table in front of the CAG and his staff. It will be a set of records that is whiter than white, showing how pure they are. The process will add nothing to the efficiency of the business or undertaking, but will take up a great deal of time, cunning and skill.

Mr. Terence Higgins: Does my right hon. Friend agree that there is a case for keeping effective records? Will he consider comments on British Airways' accounts last year? It was said that
Much of the rest of the loss"—
which was enormous—
was attributable to the cost—unquantifiable, because no records were kept—-of flooding the markets in past years with cut-price tickets".
Is it not arguable that some investigation should be carried out to see whether proper records are kept?

Mr. Peyton: Records must be kept. I repeat for the benefit of my right hon. Friend, who has not grasped the point that I was seeking to make, that good records are unchallengably a requirement, but records that are kept solely for the purpose of keeping an inquirer at bay and which do not contribute anything to the efficiency of the business are a waste of time and of scarce energy and talent.
The Civil Service is accustomed to the exercises of the Public Accounts Committee. I remind those who do not have antediluvian memories that I was once on the Public Accounts Committee. I recall that members of that august body—then as, I suspect, now—felt a certain satisfaction when they reflected on the fact that distinguished civil servants were slightly nervous and alarmed when they appeared in the Committee's presence and were also in trepidation about their subsequent reports. That may be unworthy, but it is my recollection.
I have had a limited experience of government, but the two Departments in which I have served—Power, as it was called then, and Transport—have been very much concerned with nationalised industries. I realise that chairmen and top management of nationalised industries have limited time, energy and skill to deploy. To have to do so to respond to an endless sequence of inquiries is a great source or weakness.
Sir Ronald Edwards was one of the most distinguished and wisest men whom I have ever met. When he was chairman of the Electricity Council many years ago he said to me, "I can of course put up with one inquiry, but when inquiries are directed at me from all quarters all the time, the business of replying to a Government Department, Members of Parliament, Committees and the media becomes a considerable burden." I do not believe that the House of Commons has ever considered whether it is its duty to see what it can do to help instead of to harass chairmen of nationalised industries in the performance of their odiously difficult tasks.
It seems that the power to inquire is now to be extended. It is right that Parliament has abrogated any right to look into the day-to-day affairs of nationalised industries. However, there will be no such inhibition upon the CAG in his new role. At the moment the CAG belongs to no one. In future he will belong to the House of Commons, particularly to the Public Accounts Committee. I accept that there is a need for independence.
The hon. Member for Colne Valley said that it was unlikely that the Public Accounts Committee would ever be a maverick body. The more power that is given to a body, the more likely it is to become distinctly odd and quite dangerous in the way in which it exercises those powers.
The CAG will enjoy a position of great immunity and power. It will be hard effectively to challenge either the Public Accounts Committee or the CAG in the House. It would be wrong and dangerous to suggest that we are setting up this guardian and watchdog and giving it a huge set of new teeth to bite the Executive if we ourselves will not have any control over it. That is a danger that has not been answered.
I was interested to see the letter which the present CAG has written to my right hon. Friend the Member for Chelmsford. I thought that it revealed in the CAG—I might be quite wrong—an appetite keener for extra powers than I had expected in so prudent an official. In his letter he refers humbly and modestly to the need for new knowledge. I quite agree. He mentions the fact that there will be no limitation on his discretion. He also mentions that it will be important to observe the entrenched conventions, because it is upon those that the respectability accorded to his Department depends. I applaud such things. The Bill gives me no reassurance, from what the CAG said in his letter, that those factors will be adequately provided for.
The intention is to avoid a bureaucratic approach. That is a very laudable determination. I am not convinced that that will be the result. My fear is that bureaucratic layers will result in the organisations into which he inquires.
Confidentiality is a worry. It is almost impossible for anybody to keep a secret these days. It is a serious matter. Some people think they are entitled as of right to share in the secrets of others, commercial or otherwise. We treat that lightly. From time to time we profess to be extremely shocked when so-called leaks take place. Nothing is surprising about leaks. A modern establishment is not like a sieve, but more like a colander from which information pours, especially if it is secret or sensitive.
If there is a need for reform—I do not deny that at all—it would not be a bad idea if we were to initiate it slightly closer to home. Before we extend the powers and the role of Parliament, its Committees and officials, how good are we at performing our present roles? We are a forum of debate at which all the major issues and problems that worry the nation are confronted and discussed. At most hours of the day or night throughout the parliamentary wéek the impression is not one of great tension, concern or interest. We have a major role as guardians of the public purse.

Mr. Higgins: No.

Mr. Peyton: My right hon. Friend the Member for Worthing (Mr. Higgins) does not agree. I thought we did. I thought one of the points of the Bill was that we were going to strengthen our role as guardians of the public purse. I was amazed to hear what my right hon. Friend, as an ex-Treasury Minister, had to say. Treasury Ministers have always been beyond my comprehension. I hope my right hon. and learned Friend the Chief Secretary will reflect upon that.
We in this House have the most ambivalent attitude towards public expenditure. We utter praiseworthy


sentiments about economising and cutting down public expenditure by pruning and cutting out waste in the most ruthless fashion. When it comes to matters closer to home, we all know how to push for added expenditure and how to condemn those stupid, tyrannical, oppressive and narrow-minded Governments that would rule out a favourite piece of expenditure which we especially favour.
Our last function is that of a legislature. A few years ago Lord Renton produced an extraordianarily good report that was accepted with enthusiasm by the few Members of Parliament who attended the debate. That report stated that the quality of our legislation was abominable. It was incomprehensible to the courts, to the taxpayer and to any of the victims. We were going to do better. But absolutely nothing has happened. When we come to legislation regarding taxation we go from the bad to the deplorable. My plea is that, before the House takes unto itself greater powers and establishes officials who enhance the dignity of the Public Accounts Committee—I would value the attention of its Chairman at this point—I hope that we might seriously consider two questions. First, will the Bill have the results we intend? I have grave doubts about that. Secondly, should we not first devote a great deal more attention to the clumsiness and incompetence with which we carry out our own business?

The Chief Secretary to the Treasury (Mr. Leon Brittan): I welcome the opportunity to explain the Government's views on this important Bill. First, I congratulate my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) warmly on choosing this subject. It is entirely fitting that he should do so, given his impressive record in helping to improve the effectiveness of the House in examining and supervising the Executive. Long after the minutiae of many policy decisions which seem vitally important at the time, are forgotten, the reforms that he brought about in the conduct of our affairs will be spoken of with respect and gratitude.
But, as my right hon. Friend and other hon. Members will know, the Government do not agree with all the proposals included in the Bill and I shall explain our reservations later. As speakers from the Government Bench have made clear on previous occasions, the Government accept the desirability of reform in this area. The Exchequer and Audit Department needs to be brought up to date and the role and status of the Comptroller and Auditor General needs to be clarified. There is, therefore, much in the Bill that I welcome and support.
As a Treasury Minister, I welcome the underlying purpose of the Bill—to get better value for money, greater efficiency and greater effectiveness in public spending.
I recall the right hon. Member for Heywood and Royton (Mr. Barnett), speaking in the debate on 30 November 1981 on the Public Account Committee's report on the role of the CAG—on which, in many respects, the Bill is based—saying
The objectives of the Treasury and of the Public Accounts Committee are the same."—[Official Report, 30 November 1981; Vol. 14, c. 40.]
I agree, and the right hon. Gentleman and others have underlined that point today.
The concern of the Treasury and Treasury Ministers is to avoid waste and to get value for money. The objective

expressed so powerfully by my right hon. Friend the Member for Taunton (Mr. du Cann) to do just that is one that I fully share. Indeed, I spend the greater part of my working life doing that.
With this Government, those concerns are not confined to Treasury Ministers. They have been a guiding and a central theme of Government policy throughout the public sector. The underlying aims of the Bill—to identify and eliminate waste and profligacy in public spending, and thus to increase the control of public expenditure and improve its effectiveness—are entirely consistent with the policies of the Government. Whether that will be true of all conceivable future Governments, I am not so sure. I can think of some who aspire to Government who would not welcome legislation designed to curb profligacy and extravagance, and in so doing discourage excessive spending. But I will not speculate further.
A constitutional issue was raised of the relative powers of the legislature and the Executive. I merely say that it was under this Government that my right hon. Friend the Member for Chelmsford was instrumental in setting up the new departmental Select Committees, which are already proving highly effective. The Government are not afraid of being held accountable for their actions and policies by the legislature. We welcome the development of the Committees which, as my hon. Friend the Member for Leeds, North-West (Sir D. Kaberry) said, have extensive powers to call for papers and persons. We accept the need for a powerful and effective Public Accounts Committee and a powerful and effective Comptroller and Auditor General. Our reservations about the Bill are not based on any wish to protect the Government from Parliament.
We have, therefore, not sought to avoid the issues. We published a Green Paper in 1980 and a White Paper in 1981. Since then, we have been working to try to find an agreed basis on which to proceed. Some measure of agreement has been achieved. For example, the Local Government Finance Act 1982 made provisions for the CAG to have access to certain papers of the Audit Commission, and the Chairman of the PAC, in particular, welcomed those arrangements. However, I cannot pretend that agreement has been reached with those who have taken an interest in these matters on all the important issues raised, and, in those circumstances, the Government have not thought it right to introduce their own legislation.
My right hon. Friend the Member for Chelmsford referred to the money resolution. I assure him publicly, as I have already done privately, that the Government will not seek in any way to impede the wishes of the House by not co-operating to the full with the production of the necessary money resolution, should that need arise.

Mr. St. John-Stevas: I wish to express my appreciation of that forthcoming and constitutional remark.

Mr. Budgen: Has my right hon. and learned Friend any information as to how big the new Department will be? I note from the helpful document that the CAG sent to us that he has 800 staff. Presumably, as the extent of the audits increase, it will be necessary to recruit further staff. To what extent will the Treasury be prepared to support an extension of the staff of the CAG?

Mr. Brittan: There is no question but that the Bill would mean a substantial increase of staff. It does not


indicate how extensive that will be—[Interruption.] Opposition Members are expressing indignation that there should be any question of an increase in staff.

Mr. Joel Barnett: I assume that the Minister will concede that there will be a reduction in staff in the Monopolies and Mergers Commission.

Mr. Brittan: I appreciate that the staff of the Monopolies and Mergers Commission will not be required for that aspect of its duties. Whether the net balance of staff is a plus or a minus is impossible to determine.
I want to deal with the Bill in three parts. As I have already said, there is much that we welcome in the Bill. Subject to any detailed drafting changes, which I hope, if it arises, we can agree at the appropriate time, we support the establishment on a statutory basis of the CAG's examinations of the economy and efficiency of Government Departments and non-departmental bodies. These studies have been developed with the encouragement of the House and successive Governments, but were not covered by the 1866 and 1921 Acts. It is desirable and important to give firm statutory authority for those developments.
I welcome also the provisions in the Bill under which the staff of the Exchequer and Audit Department will no longer be civil servants but employees of the CAG. Such a step makes it clear that the department is in no sense a creature of the Executive, which is all to the good.
The Bill will repeal the provisions in the existing Acts, which give the Treasury certain powers of direction over the CAG. In particular, the Treasury has the power under section 3 of the 1921 Act to direct the CAG to undertake the audit of certain accounts. Those powers are hardly ever exercised nowadays, and never in a way that has any material effect on the CAG's independence. We have no wish to exercise those powers, and I regard their presence on the statute book as misleading and anachronistic. I accept that the provisions are inappropriate and should be removed or amended on the lines suggested by the Public Accounts Committee.
Clauses 8 and 9 would establish a Public Accounts Commission to examine the annual estimates for the proposed National Audit Office and to appoint the accounting officer for the office. We certainly do not wish to raise any objections to those provisions. Again, clause 12 provides for the Public Accounts Committee to make requests to the CAG. As we made clear in the Green Paper, we attach great importance to preserving the effective working relationship between the Comptroller and the Public Accounts Committee and we are happy to accept that proposal, therefore, on the permissive basis that the clause provides subject, as I have already made clear, to any drafting changes that may be appropriate.
I hope that the House will recognise that a substantial part of the Bill represents a change in the modern representation and presentation of the methods of working and powers of the CAG. We have considerable sympathy with that.

Mr. John Garrett: The Minster said that he endorsed the proposal that the staff of the Exchequer and Audit Department should become staff of the CAG and no longer civil servants. Does it follow that he approves that part of the Bill that provides for the CAG to be appointed on an Address to the House of Commons and, therefore, that it is quite clear that the CAG will be an Officer of the House?

Mr. Brittan: I shall deal with that point later in my speech.

Mr. English: The Minister referred to section 3 of the 1921 Act. He did not mention section 3(3) which is amended by the Bill, and states:
If in the course of any such examination any question arises between the Comptroller and Auditor General and the accountant,"—
that is usually a permanent secretary—
it shall be referred to the Treasury, whose decision thereon shall be final.
He did not say that the Treasury would be prepared to give up that power.

Mr. Brittan: Perhaps that could be considered in Committee when we are talking about the subsections. The general principle that the Treasury has no wish to control the operations of the CAG is an important change that I am happy to confirm to the House, as the Government have already said they are prepared to go along with that on other occasions.
In the second category come provisions relating to the status and appointment of the Comptroller and Auditor General, where we have some reservations but ones that I hope can be relatively easily resolved. We think that it is most important that the Bill establishes clearly the independence of the CAG both from the Treasury and the rest of the Executive, and from the House itself. This may be the implication of clause 12, but we would want to make some amendments elsewhere in part II of the Bill to remove doubt on that score. The CAG already has a unique right of access to Government papers for the purposes of audit and the Bill confirms that in clause 6. It would not be appropriate, therefore, for the CAG to be subject to direction either by the Government or by the legislature. I welcome, on this point, the speech of the right hon. Member for Heywood and Royton, who laid great stress on the importance of the independence of the CAG. That must mean a genuine independence and not the substitution of the direction of one body for another.
Whatever the unique right of access that the CAG has, the Government also have not a unique, but a legitimate and strong interest, in the appointment of the CAG. Clearly the House and the Public Accounts Committee, in particular, have a considerable interest also. I accept a case for a change in the present position whereby, in effect, the Government consult, but do no more than that, about the appointment. In practice, the appointment consultation is an important matter, and not to be treated lightly. I accept that there is a case for a change in the formal position.

Sir John Biggs-Davison: Could my right hon and learned Friend amplify what is meant by the Government's "interest" in the appointment of the CAG?

Mr. Brittan: The Government's interest is that the CAG has access to the papers of the Government's Departments, even without the Bill. That includes some highly sensitive papers, and it is right and proper that the CAG should have access to them. However, it means that the Government have a substantial, although not an exclusive, interest in his appointment. The House and the Public Accounts Committee, in particular, have a considerable interest also and that is why I see the desirability of the change in the present position.
In our view, the advice to the Queen—it appears to be common ground that it will be a Crown appointment—on


the appointment of the CAG should reflect the agreement between both the interested parties. The Bill as presently drafted does not achieve that, and could lead to the Queen being offered conflicting advice. Constitutionally, the Queen would be bound to look to the Prime Minister for advice on so important an appointment.

Mr. John Garrett: Why?

Mr. Brittan: Because that is the constitution. I know that my right hon. Friend the Member for Chelmsford recognises the point and I hope that if the Bill commends itself to the House it will be possible to reach an agreement that reflects the interest of all concerned on the matter. There is no reason why, if that is a live issue, it should not be possible to reach a mutually acceptable agreement.

Mr. Budgen: Will my right hon. and learned Friend explain how he imagines the House of Commons will be able to express a unanimous opinion as to who should be a CAG? The House of Commons could not sit as an appointments bureau interviewing applicants. While we have an ancient and well-tried system of electing a Speaker, I do not see how the House would be able to agree collectively on a CAG. In the end, it would probably be decided by the Whips Office of the governing party.

Mr. Brittan: There are difficulties, and it is clear that the conclusion that my hon. Friend has drawn as the possible outcome is not one that the sponsors of the Bill would hope for. However, it is not for me to say what the sponsors have in mind, but it might be possible to agree on a system in which the interests of the Government and of the House, which are separate interests, could be accommodated. However, as the Bill stands, it is not possible to do that.

Mr. Dykes: In his analysis, will my right hon. and learned Friend reconsider the point that he was making? Should not the Executive, which is intrinsically the servant of the House, find that it has a normal duty in making recommendations or suggestions to Parliament about such an appointment, but that the decision rests with Parliament as a whole?

Mr. Brittan: It would be a great mistake if we allowed ourselves to become too tied up in this point because it should be possible to find a method of appointment that meets both requirements. The appointment should not be unacceptable to the House, but equally it should not be unacceptable to the Executive. No mechanism has yet been found, but that should be possible.
The third group of proposals raises fundamental issues about the range of the CAG's authority, and the Government have a little difficulty with what is being proposed. Clauses 2, 3 and 4 would extend the CAG's inspection rights to nationalised industries, other publicly owned corporations and to any company or other body mainly supported by money voted by Parliament or loans from the National Loans Fund.
That is a considerable extension of the range of the CAG's activities. None the less, it falls a long way short of the general principle that has already been referred to in this debate—the high constitutional principle—that the CAG should be able to follow public money wherever it goes. The Bill does not provide for that, although I know

that some hon. Members would like it to, while others fear that the scope of the Bill is such as to enable it to be extended.
Much of that debate has been conducted as though that high constitutional principle has been at stake. If it were, it would indeed be a profound and fundamental one, and, once one was persuaded of its constitional validity it might be necessary to accept its consequences even if they turned out to be disadvantageous in practice. The practical drawbacks of trying to implement such a principle in full are clear, and have been seen by the sponsors of the Bill. It would involve giving the CAG access to the books of every firm accepting regional development grant, every farmer benefiting from an agricultural scheme, every church receiving Government grant.
Fortunately, the Government and the sponsors of the Bill are at one in thinking that wholly undesirable, and the Bill is couched in more limited terms. However, my right hon. Friend the Member for Yeovil (Mr. Peyton) has pointed out the dangers of this. Once one comes to the conclusion, as the sponsors of the Bill have done, that it is not appropriate to apply the principle of following public money wherever it goes, we are not talking about a Bill giving effect to the high constitutional principle. Instead the case for extending the range of the CAG's activities has to rest on more mundane—if no less important—considerations such as those that my right hon. Friend the Member for Chelmsford has put forward. It has to be judged as a means of increasing the efficiency of publicly owned industries and improving accountability. It is that test that has to be applied. It may be less dramatic and less exciting but it might lead people with the same objectives to different conclusions.

Mr. John Wells: It has been pointed out to the House that my right hon. Friend the Member for Chelmsford has imposed a self-denying ordinance about Church schools and such matters. Is it the Minister's understanding that the Arts Council and the Tate gallery and similar bodies would be under the direct scrutiny of the CAG?

Mr. Brittan: The provisions as to coverage are drafted in language which will make them not always easy to apply. It the Bill goes to Committee, the exact extent of the coverage—both what is intended and what the effect will be—will require long and careful scrutiny, because it is not clear from the Bill's wording.

Mr. Maclennan: Every sponsor of the Bill who has spoken has invoked what they have called the "high constitutional principle" in support of the Bill, and has expressed the view that the restrictions on the ambit of the CAG's functions under the Bill are necessary, not for any reason of principle, but as a practical matter. The right hon. Member for Taunton (Mr. du Cann) dealt specifically with that issue. Will the Minister, therefore, not mislead the House about the sponsors' intentions, which are clearly to seek to give effect to an issue of high constitutional importance? It is not a matter of mere practical judgment as to the best way to look after the efficiency of the nationalised industries.

Mr. Brittan: I do not believe that anything I have said could possibly have led hon. Members to believe that I have the slightest wish to mislead the House about the motives of those sponsoring the Bill. I hope that the tone of my remarks would point to the contrary.
There is a serious point. Those who approach the matter started on the high constitutional ground, but when they looked at the practicalities of it they, properly and understandably, and in my view correctly, abandoned that high constitutional ground and sought only to occupy the lower slopes. I believe that was a correct decision, but once it is made it is difficult to say that the Bill gives effect to the principle of following public money wherever it goes, which is what the Public Accounts Committee recommended originally, because it does not.
As I have said already, we are very much at one with the sponsors in their aims. No Treasury Minister could fail to be. However much sympathy I bring to bear for the aims, and however much respect I have for my right hon. Friend the Member for Chelmsford and his fellow sponsors, I cannot believe that the more controversial provisions in the Bill would actually achieve our shared objectives. In particular, the Government believe that extending the range of the CAG's access to the nationalised industries and other public corporations would be a large and retrograde step in the wrong direction.
This Government of all Governments can hardly be accused of wishing to mollycoddle the nationalised industries and shield them from pressures for greater efficiency. That is not our reputation and it is not the reality. Indeed, exactly the reverse is the truth and we have often been accused, unjustly in my view, of pressing too hard for improvements. Indeed, when it became known that I would be speaking in this debate I found that my previous reputation among the nationalised industries suddenly totally transformed. I was not exactly a popular figure with them before. There can be no doubt, therefore, as to our genuine desire to improve the performance of these industries and to make them more accountable and responsive to the public. The question, through, is: what is the best way to do that? Our approach has been to set clearer objectives and targets for the management in the industries, and to establish a firm parameter of financial controls.
We must take a fresh look at the vexed question of how to handle those industries that remain nationalised which, if we are being honest, has bedevilled all Governments since nationalised industries were first set up. Our policy of establishing firm financial controls is not just a series of pious objectives; it is quantified, and therefore its effectiveness, or otherwise, can be assessed.

Mr. Peyton: How often has my right hon. and learned Friend discussed with the chairmen of the industries ways in which those desirable objectives that he has outlined could be achieved?

Mr. Brittan: Frequently and on a regular basis. It is a new approach, with a new system of setting firm financial controls and, within them, to encourage management to act in a commercial manner free, as far as possible, from Government interference in management decisions.
In addition, in order to provide an external check on the effectiveness and efficiency of the industries, we have provided for periodic scrutinies by the Monopolies and Mergers Commission, to which reference has been made. In taking this path, we have followed closely the undertaking in the manifesto on which we were elected which said that

We want to see those industries that remain nationalised running more successfully and we will therefore interfere less with their management and set them a clearer financial discipline in which to work.
The policy we have followed has given effect to that commitment.
Of course, the general doctrine that nationalised industries should operate at arm's length from Government and Parliament has been accepted by successive Governments since the war. However, there has been a new departure by this Government in the extent to which we have sought to clarify what that actually means and how it should operate. We have set about, in a determined way, providing the industries with new financial targets and, for many of them, performance aims to prevent monopoly industries meeting their targets al the customers' expense. In addition, we have set firm external financing limits for each year. They have not always been very popular. Further, following the recent CPRS report on relations between Departments and nationalised industries, we are agreeing objectives for each industry and have established an annual planning cycle for approving the corporate plans of each industry.
The aim of all these measures is to achieve clarity on what the industry should be aiming for and within what financial disciplines it has to operate. In conjunction with this approach, we have sought wherever possible to bring market disciplines to bear directly both by encouraging competition, for example, in posts, telecommunications, buses, and electricity generation, and by transferring businesses to the private sector wherever possible. Our record, therefore, is consistent and our policy is, clearly thought-out and quite specific. There is a lot still to be done but the framework of clear objectives, clear financial limits, and then commercial freedom to manage is the right one. The reason that I cannot go along with the proposals in the Bill as they affect the nationalised industries is that I truly believe that there is a substantial risk of a major setback to this clear and new policy if the Bill goes through.
What would be the implications of giving the Comptroller and Auditor General inspection rights? Reference has been made to the letter that was sent by the Comptroller and Auditor General about this on 24 January. That letter argues that the sort of approach that he would adopt would be no more burdensome for the industries than the existing access of the Monopolies and Mergers Commission. In terms of man hours per year, that may turn out to be true, but in terms of the impact on the style of management I have grave doubts whether it could be.
The Monopolies and Mergers Commission conducts periodic investigations into the effectiveness and efficiency of various aspects of nationalised industries. However, as my hon. Friend the Member for Leeds, North-West has pointed out, as has my right hon. Friend the Member for Yeovil, the proposal of the Comptroller and Auditor General in his letter, and especially in paragraph 12, is quite different. He makes clear that he would
aim to maintain regular contact with at least all the larger industries in order to be fully aware of the problems facing them and any important developments in their business, programmes and projects".
He goes on:
I should expect, for example, to examine material prepared for corporate plans".


That is not the corporate plans themselves but the preparatory paper as well. His letter goes on to list
periodic financial and costing data, the output of management information systems minutes of meetings, and various other internal information sources".
In other words, the CAG's staff would be a permanent presence in the industries, with access to internal papers and information of all sorts, monitoring developments as they happen and reserving the right to return to any mistakes that they might identify or think they have identified in subsequent major examinations. That would be very different from the Monopolies and Mergers Commission. It is not simply a question of transferring a function from a body under one control to another body under a different control doing the same thing. What is suggested would involve external access on a continuing basis. What is more, it is a basis that goes far beyond that currently exercised or sought by Ministers and Departments. It would be bound to affect the style of management in the industries.
Hon. Members may well take the view at first sight that it is entirely appropriate for failings and mistakes in terms of economy, efficiency and effectiveness to be brought to book and made publicly accountable to Parliament. I agree that it is entirely appropriate for a Government Department responsible to a Minister who is himself directly accountable to Parliament. However, all hon. Members know what that system does to methods of working. Decisions are taken with painful slowness, consulting anyone who could possibly have an interest. Every new question is referred upwards to get a ruling on policy which then covers every future case. All decisions are carefully recorded in writing with reasons for them spelt out and copies to all and sundry. In a Department where every contract and every payment may be crawled over by Exchequer and Audit Department staff and where the Permanent Secretary may be required to answer before the Public Accounts Committee to a detailed CAG report, these costs may rightly have to be incurred. Even in Government Departments, we are trying, by means of the new financial management initiative, to get more responsibility decentralised so that more decisions on resource allocation can be taken down the line. I am sure that if the House stops to reflect it will agree that the Government's style of management is not the way to operate a nationalised industry.

Mr. Michael Morris: I am grateful to my right hon. and learned Friend for giving way. I admire his rhetoric. Will he explain why every one of the items that he has listed as being disadvantageous to the nationalised industries is undertaken in relation to defence contracts? What is the difference?

Mr. Brittan: There is a difference between a situation in which the Government are buying things and in which the House, through the Comptroller and Auditor General, is scrutinising how they are going about their activities and the operation of a commercial concern. [Interruption.] Opposition Members may choose to introduce an element of raucousness into a serious debate. I would have hoped at least that the hon. Member for Norwich, South (Mr. Garrett), with his long interest in these matters, might wish to hear the arguments, which may be unwelcome to him

but which are not expressed by the Government uniquely, as he knows, and have been heard from hon. Members of noted independence who have spoken.
Those familiar with the nationalised industries, which have their origins in a Government Department, know what a long way it is necessary to go to make them efficient commercial undertakings. When Sir George Jefferson, for example, became chairman of British Telecom he found a rule book running to many thousands of pages. I would suggest that that was a direct legacy from the days when that industry was a Government Department. About 150 telecommunications instructions were sent to a quarter of a million people every month. That has now been reduced somewhat, but even so it is a vivid illustration.

Mr. Dykes: rose—

Mr. Brittan: The proposals in the Bill, even when operated responsibly, as I am sure they would be, would be bound in my view—and it a view shared by all the chairmen of the nationalised industries without exception—to lead to slower speed of decision, less willingness to take risks and less commercial efficiency. Management would be bound to look over its shoulder and wonder about how it would all look in a public post mortem.

Mr. Dykes: Has my right hon. and learned Friend seen the breathtaking letter from the chairman of British Airways, Sir John King, in which he states:
It is no use believing that if, as a result of this Bill, the results in an industry were disastrous the management could with advantage be kicked out. No managers with any track record would come forward to take the vacant jobs.
Is that not an amazing admission of the need for a quiet life, unfettered by Parliament or the Executive?

Mr. Brittan: I do not think it is anything of the kind. It illustrates the point made by my right hon. Friend the Member for Yeovil. A change of the type envisaged would make it more difficult to attract top-class commercial management into the industries. A point that must be of concern to my right hon. and hon. Friends is that it would also, as has been made clear, make it more difficult to privatise the industries both because it would make them more bureaucratic and centralised and thus less attractive to private investors, and because the Comptroller and Auditor General would retain access to industries in which a minority of shares had been sold as the first tranche towards complete privatisation.

Mr. English: rose—

Mr. Brittan: It is important for those who are concerned about privatisation to consider whether they really wish to support a measure that those who are involved in these matters regard as providing a major obstacle to further moves in the direction of privatisation.
Mr. MacGregor, the chairman of British Steel, has said that this part of the Bill could stop further privatisation.

Mr. English: rose—

Mr. Brittan: I was also interested to see Sir John Sainsbury's letter in The Times in which he said that all in the private sector should sympathise with such views and that the proposals in the Bill would make it more difficult, if not impossible, to attract the ablest managers into the nationalised industries with the result that the


country would be the poorer. That is not the view of someone from the nationalised sector or with a vested interest.
Those are the direct effects on the style of management in the industries, but they would be bound to be reinforced by their indirect impact through a change in the attitude of Ministers and Departments towards their industries that would inevitably follow.
Under the Bill, the Comptroller and Auditor General, and through him Parliament, would have access to detailed information about day-to-day management going far beyond what Government Departments currently have or seek. It is just conceivable that Ministers and Departments would not take any notice of that and would continue to refuse to answer for the day-to-day running of industries and accept the risk that the Comptroller and Auditor General would report to Parliament on matters of which they had not previously been aware. But the chairmen of the industries cannot account to the House and there would, in such a system, be strong pressures on Ministers to answer the criticisms in the reports.
Is it not more likely, therefore, that Ministers would feel obliged to keep in closer touch with their industries to protect themselves? Indeed, management in the industries would itself want to clear its lines more frequently with Ministers. I have little doubt that, over time, contrary to all the protestations that Ministers of both political parties have made over a generation, Ministers would inevitably be drawn more and more into the day-to-day decisions in the industries. That would be a most unwelcome move. It would increase bureaucracy both in Whitehall and in the nationalised industries. It would need more staff. All that would be on top of the existing financial audit of the industries.
While we do not, for those reasons, support extending the range of the Comptroller and Auditory General to the nationalised industries, we recognise that Parliament has a legitimate interest both in the policies and the programmes of nationalised industries and in their efficiency. It is important to remember that the Comptroller and Auditor General already has full and free access to the files of sponsor Departments that contain a great deal of information about the operations of the nationalised industries. He can report on those areas for which Ministers are responsible, and Ministers can be held to account for it. In addition, as my hon. Friend the Member for Leeds, North-West said, the Select Committees have great powers in relation to persons, papers and other matters, and are quite ready to use them.
Beyond that, the House might wish to consider whether the Public Accounts Committee or other Select Committees could become involved in following up reports of the Monopolies and Mergers Commission and, possibly, in helping to choose subjects for investigation by the commission. That would build on the existing approach and, instead of requiring the disbandment of an existing staff with experience in value-for-money audit and building up a new staff under the Comptroller and Auditor General, would build on the existing capacities of the commission and its deep experience of examining matters of public interest in both the nationalised sector and in the private sector.
Much the same arguments apply in the case of companies such as Rolls-Royce, British Leyland and Shorts as in the case of nationalised industries. Those companies operate in the most fiercely competitive

markets and need top-class executives to run them. The presence of staff from the Exchequer and Audit Department could do grave damage to the flexible and commercial approach that is essential in those areas.

Mr. Peter Hordern: The point that my right hon. and learned Friend makes is that the Comptroller and Auditor General might crawl over the activities of Rolls-Royce and other firms. How does he explain the fact that the General Accounting Office in the United States of America has exactly the same powers, which it uses freely in relation to firms such as Lockheed and all the large space industry firms?

Mr. Brittan: The question is not whether other countries have powers comparable to those sought in this Bill, but the effect of the exercise of those powers. That is an unproven matter.
In addition, it is important when one is talking about companies such as I have just mentioned for those companies to co-operate with other companies, especially foreign companies. The prospects for such co-operation would be seriously reduced if the Comptroller and Auditor General has access to those companies and possibly jointly owned subsidiaries. The Bill will give access to the books and records of British subsidiaries of foreign companies, and the House will appreciate the potential effect of that on inward investment. It would also give the Comptroller and Auditor General access to many local companies, charities, and a range of voluntary bodies, many of whom may receive a grant from a body one or two removes from Parliament, for example, the Sports Council or the Manpower Services Commission. It is clearly right that the Comptroller and Auditor General should investigate the systems of Government Departments and other major sponsoring bodies, such as the Housing Corporation or the Sports Council, for securing that the Exchequer gets value for money, but it is unnecessary and undesirable for him to investigate the bodies that receive the grants.
The Bill seeks to exclude local authorities from its provisions, which is wise, in view of the establishment of the Audit Commission for Local Government. I note only that there is some doubt as to whether the Bill as drafted achieves that purpose, but I hope that that can be sorted out without difficulty.
Finally, on scope, clause 5 provides for the involvement of the Comptroller and Auditor General as the auditor of health authorities. He already has access to the authorities' books and records. The audit is carried out by auditors employed by the Department of Health and Social Services, and they are an essential support to the accounting officers of those Departments in accounting to Parliament for the expenditure of voted funds on the National Health Service. If the Comptroller and Auditor General took over the audit of the authorities, a duplicate set of auditors would have to be maintained, reporting to the accounting officers. That would not be sensible, and I hope that it is not what the Bill intends, but I am sure that if the Bill goes further that, too, can be resolved in further discussions.
As I have said, there is much in the Bill that the Government welcome and we shall certainly not oppose its Second Reading. However, I do not think that anyone is under any illusion that the extension of the Comptroller and Auditor General's authority to nationalised industries and other bodies entirely dependent on public funds will


achieve the purpose, shared by the Government, of improving efficiency and effectiveness. It would be ridiculous to suggest, and I shall not do so, that the proposals are anything other than a major feature of the Bill in its present form and therefore I cannot positively commend the Bill to the House.
However, I hope that if the House decides to give the Bill a Second Reading our further deliberations will enable a consensus to emerge, leading to genuine reforms in a most valuable parliamentary institution without jeopardising the Government's specific objectives—which I was entitled to set out—in controlling the public sector and reducing its size. In its present form I cannot say that the Bill reflects such a consensus.

Mr. Robert Sheldon: We have had not only a disappointing response but one that was much more disappointing than we were led to believe it would be. It is clear that the Chief Secretary to the Treasury is utterly opposed to the very fundamentals of the Bill. That was shown by his surprising hostility to so much of it during his lengthy remarks. He said at the end that he would not oppose the Bill's Second Reading, but that was in stark contrast to his comments about much of it. The only explanation must be the standing of the Bill's signatories, which is a dominant and important feature of it.
We are grateful to the right hon. Member for Chelmsford (Mr. St. John-Stevas) for introducing the Bill and his work on it, and to its many signatories. The right hon. Gentleman was a distinguished Leader of the House, and his work in bringing about the Select Committee system is a lasting tribute to his efforts in that position. From the old system of the Estimates Committee with all its weaknesses, to the Expenditure Committee, which was in some ways a halfway house, the right hon. Gentleman has got it right on the third attempt. It is fitting that on such an occasion we should acknowledge his work.
My right hon. Friend the Member for Heywood and Royton (Mr. Barnett) produced the report on which the Bill is based and played a prominent part in its production, as did my hon. Friend the Member for Norwich, South (Mr. Garrett), who, with his width and depth of vision, his persistence, knowledge and understanding of these matters, contributed so much to our understanding.
The right hon. Member for Taunton (Mr. du Cann) said that we were trying to remove powers from bureaucracy and give them to Parliament. The right hon. Member for Yeovil (Mr. Peyton) said much the same thing. He was worried about the increasing power of the Executive and he wanted to find some way to control it.
As the right hon. Member for Taunton said, Prime Ministers are becoming more like Presidents. Not only do they have the power to appoint Ministers, but we are seeing that power becoming more concentrated in the work of the Prime Minister's office, which, in the words of the right hon. Member for Taunton, is becoming a repository of so much which is more like Presidential than Prime Ministerial power.
In addition, many Members of Parliament are increasingly spending more time on activities in the House than elsewhere. Because of their salary and several other factors, Members of Parliament are to a greater extent,

though not exclusively by any means, becoming more full-time Members of Parliament. That shows the way in which Prime Ministerial power exerts itself. There are more candidates for ministerial office and that increases the power of the Prime Minister.
But more important even than that is the way in which the changes have taken place step by step with the increasing power of the Civil Service—the narrowing of the apex. The Cabinet Secretary is now the sole head of the Civil Service, and not only joint head. He advises the Prime Minister, consults her daily, controls the activities of civil servants in their Ministeries and controls appointments, promotions and recruitment. To have all that power in the hands of one person is dangerous indeed.
At present we have a distinguished Permanent Secretary to the Treasury with long and practical experience in the conduct of his position, but we must consider the danger if in the future we have a weak Prime Minister and a strong head of the Civil Service. It is correct and important that we take action to allow for changes that may come about as a result of the increasing power of the Executive.
The operation of the Executive has changed in a number of important ways. I mentioned Prime Ministerial power and the power of the head of the Civil Service. The complexity of government and administration must be added to those, as well as the larger number of full-time Members of Parliament. All those accretions call for greater surveillance of the activities of the Executive. As power is concentrated and government becomes more complex, the need for examination becomes greater. As the Executive monopoly continues, as the right hon. Member for Taunton (Mr. du Calm) said, and in many cases grows, it is essential that Parliament attempts to restore its hard-won rights.
The nationalised industries are opposed to some of the changes proposed. I believe that that is largely due to ignorance—failure to understand exactly what it means to come before the scrutiny of the Comptroller and Auditor General and the Public Accounts Committee in those cases where it might be applicable. It is due to confusion about the powers that we have and those that we exercise.
In theory, we have immense powers. We can bring anyone to stand at the Bar of the House or put people into the Tower of London. Much of the fear of nationalised industries, as well as others, is based on their perception of our power rather than the exercise of those powers. In practice, as we well know, we are much more reasonable. Sometimes we are weak, and not all that infrequently we may be pusillanimous. The Public Accounts Committee's reports are carefully phrased. The errors and other matters that they reveal are much more serious than the language would suggest. That shows the understatement which we use, and which is a defence for those brought before the Public Accounts Committee.
My right hon. Friend the Member for Heywood and Royton denied that there would be undue interference. He is right. We have only to consider the various Chairmen of the Public Accounts Committee since I have been a Member of Parliament to show the way in which these matters would be brought up. I just missed Douglas Houghton, but since then there have been John Boyd-Carpenter, now Lord Boyd-Carpenter, Harold Lever, now Lord Lever, Edmund Dell, the right hon. Member for Taunton and now my right hon. Friend the Member for Heywood and Royton. They are not people—and this


applies to the members of the Public Accounts Committee—who would deliberately want to deny opportunities for commercial judgment which nationalised industries and other should exercise. If the Select Committee on Nationalised Industries could avoid the pitfalls, I have no doubt whatever that the Public Accounts Committee can avoid them.

Mr. Eggar: I recognise the analogy between the two Committees, but I and the nationalised industries are worried that the Comptroller and Auditor General and his employees will sit permanently within those industries. We are not concerned about the discretion of the Committee.

Mr. Sheldon: The names that I have just read out are sufficient for me to be assured of the way in which the system will operate. A number of nationalised industries behave with the same restraint as the Public Accounts Committee will employ.
If I were chairman of a nationalised industry I should be far less worried about my commercial judgments being set aside by the Public Accounts Committee than I would about the strong arm tactics of Ministers acting as they often do for political purposes, and sometimes for party political purposes. Their often distorted commercial judgment avoids the requirement of accountability.
What happens now is that the Minister makes a suggestion to the chairman of a nationalised industry and the chairman makes his decision based upon the Minister's pressure. That pressure is not subject to examination by the House, the Public Accounts Committee or any other body. If I were a nationalised industry chairman, I should rather put my trust in an examination by such a body than in a Minister who makes a decision that cannot be revealed.
It is not just that the chairmen prefer the devil they know to the Public Accounts Committee, which they do not know. My judgment is that the political decisions of nationalised industries will in future be open rather than closed, but normal commercial decisions will in all cases remain closed under the new procedures.
The Chief Secretary to the Treasury talked about the appointment of the Comptroller and Auditor General. He said that agreement would be needed between the interested parties. The Treasury's views should be made known but the decision must rest with Parliament, as the hon. Member for Harrow, East (Mr. Dykes) said. The need to follow all public money must be limited in some cases, such as those involving farmers and their grants, for example. However, in the main the principle stands.
The best example of a public body worrying about the Public Accounts Committee becoming involved in its affairs was that of the University Grants Committee. I was a member of the Public Accounts Committee at the time. I have served on the Committee for nine years, half of that time as a Back Bencher, and half as Financial Secretary to the Treasury. The UGC was worried that its accounts were to be audited by the Comptroller and Auditor General. I remember Lord James, a distinguished vice-chancellor of York university, welcoming the Public Accounts Committee's activities. Slowly, bit by bit, he convinced a number of other vice-chancellors of the value of the Committee's work. The vice-chancellors were scared stiff that the efficiency of their university—the number of students in a faculty, the number of passes and

so on—would be affected. Their fear was unjustified, but it was similar to the fear now being expressed by nationalised industry chairmen.
Parliament has a number of roles. As the right hon. Member for Taunton said, it has to sustain the Government. It also has to scrutinise, question and obtain expert advice on which to base its investigations and understanding. The Bill will enable commercial secrecy to be maintained, where it needs to be.
When we discuss these issues, we should not belittle our role as responsible Members of Parliament. Other legislatures have power to examine and investigate. We can stand comparison with them. They seem to avoid these pitfalls. We must remember that in our Select Committees we have a level of responsibility that is much greater than is available in many other countries. As my hon. Friend the Member for Norwich, South said, other countries are far in advance of us in their provision for the examination and control of public money. It is of some shame to us that we, whose predecessors created the instruments of parliamentary institutions and control, should have watched while those institutions were weakened while other countries strengthened theirs.
The time has come when we can reverse that trend. We can insist that the money that the Government provide must be followed. It is our respect for public money that is the true parent of the Bill. It is our duty to give it a Second Reading.

Several hon. Members: rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. This is an extremely important Bill, as the House knows. Many hon. Members have been here all morning wishing to speak. I appeal for short speeches from now on.

1 pm

Dr. Jeremy Bray: I shall be glad to oblige, Mr. Deputy Speaker. I am delighted that my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) supports the Bill. It is clear that it has the support of all Opposition Members. I trust that nothing will be done by any vexatious Member to impede the Bill's proper progress to Committee.
I had a small part in the Bill's genesis in that I was Chairman of the Treasury and Civil Service Committee when it produced its third report on efficiency and effectiveness in the Civil Service. That report reinforced the case for a Bill of this type.
I should like to deal with the arguments about the circumstances of nationalised industries, and especially of their chairmen. They have been behaving like a gang of teenage "bovver boys". Chairmen of nationalised industries, through no foundation in the statutes, have come to occupy a role as the sole channel of communication between Ministers and the boards of those industries. They cannot sustain it. Nationalised industries face great problems, the greatest of which is the lack of a clear framework of accountability in which the naturally evolving policies of successive Governments can move.
The enormous advantage that the Bill gives nationalised industries, and especially their chairmen, is the creation of such a framework of accountability. No one who has examined the work of the General Accounting Office in the United States and the great range of work that it performs to set out the background in which federal


agencies can operate, direct and justify their programmes could possibly oppose the extension of the work of the Exchequer and Audit Department to audit nationalised industries in the interests of effectiveness, efficiency and economy.
The Chief Secretary to the Treasury is a johnny-come-lately to these problems, so the House will overlook his amateurishness about the problems of controlling nationalised industries.
The evolution of relations between Government and nationalised industries will probably come about not directly in relations with nationalised industries but by means of a wider and clearer understanding of relations between Government and corporations in general. I accept the argument that there are many respects in which nationalised industries should not be treated differently from private corporations. The difference is that private corporations need a clear and rational framework in which they can see Government policy developing. It has an enormous impact on their prospects.
There is a topical example in the exchange rate. The British Steel Corporation prepared its proposals for the Secretary of State for Industry, which he announced on 20 December, on the basis of a single economic scenario that assumed a fixed exchange rate. The result was that the proposals were outdated straight away. This week in the Select Committee on Industry and Trade the chairman was complaining pathetically about how the customers, with a 17 per cent. improvement of competitiveness against Germany, our principal competitors, are flooding in and wanting to buy British steel. That is embarrassing for a corporation that has run down its capacity to such an extent. The chairman talked about the corporation's programmes and the difficulties of fly-by-night customers. However, the fact is that he did not have a coherent background against which to shape his corporate strategy and justify it to Ministers and the House. Paragraph 12 in the letter from the CAG deals with access not merely to corporate plans but to the material prepared for corporate plans. There should be an active role for that official and his department.
I have seen the so-called files in Government Departments, stuffed with information from industries, about which the Chief Secretary talks. I well recall that when Lord Robens was chairman of the National Coal Board he put an absolute ban on any communication between the NCB and the Department other than across his desk. The sole contribution of the NCB to the fuel policy review of 1966 was one page of foolscap. That was the limit of the information that the Department had on which to plan the nation's fuel policy.
It is total fiction that Government Departments have ease of access to the affairs of corporations. The position differs from one corporation to another. The attitudes of individual chairmen differ a great deal. However, the curious mob psychology that they have developed over the Bill does no credit to any of them. I am sure that this point can be pursued in Committee. I do not see what the role would be of the Public Accounts Commission. It seems to me that all its functions can be properly, and better, discharged by the Public Accounts Committee.
It is an unfortunate precedent that the House of Commons Commission is prayed in aid as an example of the way in which the Public Accounts Commission could

work. However, the House of Commons Commission has blocked the effective working of the Select Committees. There is every danger that the Public Accounts Commission would block the proper development of the work of the Exchequer and Audit Department. This morning we have heard two hon. Members who are typical of those who are put on the august commissions of the House. They would block the development of modern accounting methods and of new functions for the Exchequer and Audit Department. If the House of Commons Commission is any model, they would do so out of total ignorance of the arguments.
It is extremely difficult to get members of the Commission to any meetings. They do not read the papers beforehand. They keep no proper record of the proceedings. They do not report properly to the House and they give no argument in justification of their decisions. It would be utterly intolerable if such a practice were to develop in the Public Accounts Commission in its responsibilities for controlling the budget of the Exchequer and Audit Department.
I hope that the Bill will go into Committee. It can be improved in some minor respects, but it is a great step forward in the development of the control of public money.

Mr. Terence Higgins: Some hon. Members have sought to put the Bill into its historic perspective, going back to Gladstone and earlier, and it is right that that should be so. However, let us look forwards instead of backwards. In 10, 15 or 20 years' time this Session may not be remembered so much for turbulences in the foreign exchange market, or even the Falklands crisis and its aftermath, as for the extent to which the procedures, particularly the financial procedures, of the House were reformed. I hope that more reforms are to be made in this Session of Parliament than were made in any previous Session. In that respect, a great tribute should be paid to my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas), the promoter of the Bill.
The establishment of the new Select Committee on Procedure (Finance) has provided a foundation on which we can build. The recommendations last Session of that Committee, of which I had the honour to be Chairman, have largely been implemented. Consequently, for the first time in centuries we have an opportunity to debate and vote upon individual Estimates and the totality of Estimates. That is an important part of the procedural reforms based on my right hon. Friend's original idea of Select Committees. I hope that we shall make further progress.
The House will know from the public sessions of the Select Committee on Procedure (Finance) that recommendations are expected on the Armstrong committee report, on the idea of "Green Budgets," on bringing taxation and expenditure together, on public sector borrowing, on the control of long-term projects, and on the question of controlling non-supply expenditure. It is important to place the Bill in that overall context.
It is true to say that the new procedures for the Estimates will enable us to look at the expenditure Estimates ex ante, but it is necessary that proper scrutiny should be applied to the huge sums of public money that are expended in other ways. In bringing these changes about the House has had the support of successive Leaders


of the House, not only my right hon. Friend the Member for Chelmsford but the present Foreign Secretary and the present Leader of the House. They have been sympathetic to these reforms and have facilitated them.
I listened with some concern to the speech of my right hon. and learned Friend the Chief Secretary to the Treasury and his reaction to the Bill. When my right hon. and learned Friend rose to speak just before noon, hon. Members on both sides of the House gained the impression by about 12.40 or a little later that his objective was to talk the Bill out. In the event, I do not think that he was successful in that operation. His reaction, particularly in the latter part of his speech, was not appropriate in the circumstances.
The debate has centred on the nationalised industries. The unnecessary fears that have been expressed by the chairmen of the nationalised industries turn on a number of separate issues. The first issue is that of confidentiality. The chairmen fear that there might be a leak of confidential information from the CAG's department. That is not a risk compared to the inevitable result of any commercial operation. The record of the CAG speaks for itself. There are no reasonable grounds to suppose that material published as a formal report will in any way be commercially damaging to the nationalised industries.
There are several other aspects of the views expressed by the chairmen of the nationalised industries which ought to be commented upon. The Bill suggests that as a result of introducing these new procedures the Monopolies and Mergers Commission should no longer have power to investigate the nationalised industries. That is right. It is important to stress that it has been inadequate in its accountability to the House. We all know that references are decided by the Government, not by the House. We equally well know—and recent experience confirms it—that it is often difficult to reach a sensible decision on the findings of the commission. The Government can decide not to go ahead with its recommendations, and the proposed change will be beneficial.
My experience of the commission—admittedly many years ago—is that its investigation is disruptive because it is more concentrated than the continual involvement in the affairs of nationalised industries that is envisaged in the Bill. The argument about the commission being a reasonable substitute for the Bill is not justified.
It is true that Governments sometimes put in accountants to carry out specific investigations, but that is also on an ad hoc basis and can be disruptive. It would be better to have a sensible basis, with regular, organised machinery to carry out the investigation.
There has been argument about the total amount of information available. The Government argue that nationalised industries are responsible to their sponsoring Departments, which are responsible to their Ministers, who are responsible to the House. I have grave doubts about whether the information from nationalised industries to the sponsoring Departments and then to the Treasury is adequate for Ministers to fulfil their functions. The extent to which Ministers are accountable in any practical sense is not a matter about which we should be complacent. Additional information such as that which will be given to the House by the CAG may enable Ministers to fulfil their functions properly. We know that sponsoring Departments sometimes have difficulty in obtaining the facts and tend to be rather protective of their nationalised industries.

Mr. Eldon Griffiths: I can confirm precisely what my right hon. Friend has said. I had some responsibility in the Department of the Environment for the British Transport Docks Board, the National Freight Corporation, the British Waterways Board and, to a great extent, British Rail. It was never possible adequately to obtain from those organisations what I needed to know as a Minister.

Mr. Higgins: My hon. Friend's experience is relevant to my point. No doubt the House will take it fully into account.
It is clear that there is a distinction to be made between policy itself and its implementation. I do not believe that the idea that the CAG would wish to delve into policy issues is well founded. If he made such a report, it would be apparent that that was what he was doing.
We must examine some of the problems of specific industries. It has been a feature of the debate that hon. Members have been reluctant to deal with particular industries. I understand that, not least because we cannot discuss them in depth on such an occasion. The right hon. Member for Heywood and Royton (Mr. Barnett) said that he would not pick out particular industries that should be investigated. We must recognise that there is a case for all of them to be subject to the scrutiny proposed in the Bill.
There has not been much comment on the Bill from the chairman of British Rail. We have recently seen the report of the Serpell committee. I shall not go into detail on that as it is to be the subject of a debate next Thursday. There may be varying views on the quality of the report. What is clear from the report is that a change of the type envisaged by the Bill would increase efficiency in British Rail and save taxpayers' money. That is important.

Mr. Eldon Griffiths: And necessary.

Mr. Higgins: I am not sure that I would go as far as that.
The chairman of British Airways has been fairly forthright in his comments on the Bill. However, let us examine British Airways' accounts for last year and the comments of the chairman on his predecessors. A quotation of his was widely reported in The Economist and various newspapers. He said of his predecessors that
the airline has been conducted in past years as though money grew on trees.
It is at least arguable that, had we had the provisions in the Bill, money would not have grown on trees quite so readily, if nothing else. We should have had a better idea of what was happening. The chairman may be doing a splendid job, but we cannot be sure of that, and it is right that we should have continuing surveillance of these matters.
I accept that the House has a duty to scrutinise public expenditure and Estimates as much as possible, but the reality of recent years—indeed almost the past 100 years—has been that we have failed in that task. Therefore, it is important, as I suggested in my intervention to my right hon. Friend the Member for Yeovil (Mr. Peyton), that proper records are kept. It is clear that in the nationalised industries they sometimes have not been kept. I quoted an example of that in my intervention.
The Economist reported that British Airways' accounts last year were as much as three months behind schedule before they were produced. Again, that might have been


obviated had they been checked a little more rapidly as matters proceeded. It is also that case that, as a result of changes,
BA's auditors have approved the accounts for the airline as a going concern on the assurance that the 'government will ensure the availability of adequate financial resources'.
Some chairmen of nationalised industries are enthusiastic to ensure that their industries are run on a commercial basis. We can be clear, from an accountant's point of view, what the position would have been with regard to British Airways last year had the accounts been done on a normal commercial basis and normal commercial criteria had been applied to its solvency. Whether that problem would have arisen if the accounts had been properly checked by the CAG as they went along is debatable.
Recent comments on the gas industry make it clear that there is a tremendous difference between the accounts of one nationalised industry and another. There is an overwhelming case for the standardisation of practice on accounts which the CAG will bring to our attention.
It has been suggested that the Bill will deter privatisation. To what extent the industries are wildly enthusiastic about privatisation is a matter for conjecture. Be that as it may, there are three cases to be distinguished.
If there is no case for an industry ever to be privatised and it is in a real sense a natural monopoly, or even a commanding height of the economy, there is a case for having the CAG in and the argument about privatisation does not apply. At the other extreme, if the area is completely denationalised and privatised, as I hope will be the case with some of these industries, the CAG has no role.

Mr. Eggar: Under the terms of the Bill as drafted, is it not the case that industries that have been privatised will be covered?

Mr. Higgins: As I understand it, if no public money is involved in the enterprise that is not the case, and that is what should happen with a clean agreement.
The intermediate case, where there is partial privatisation—a hybrid—would be caught by the provisions of the Bill. It can be asked whether investors will put their money into such a hybrid operation. I should be happier putting my money into a hybrid organisation if I thought that the other part was being checked by the CAG.
There are no grounds, overall, for taking a view on privatisation that is contrary to the provisions of the Bill. I believe that the House is right to consider the Bill. It fits in well with the overall procedural reforms that I have mentioned. I am glad that my right hon. and learned Friend the Chief Secretary to the Treasury has returned to the Chamber. I hope that, on reflection, he will look sympathetically at the Bill.
I do not accept almost the whole of the latter part of my right hon. and learned Friend's speech. I believe that he is right to be worried about some aspects of the Bill. No doubt there are matters that need to be considered in Committee. It is difficult to see how both the House and the Government can have a say in the appointment of the CAG if they disagree. We have to be clear—it sounds rather like a nuclear defence debate—which of the partners, if it becomes a partnership, will make the decision.
My right hon. Friend the Member for Chelmsford is to be congratulated on his Bill. It makes important changes. It fits into the overall pattern of reform for which he has been to a large extent responsible. I hope that we shall have the Government's support for this and for other procedural reforms which I hope will come from the Select Committee on Procedure (Finance) in the near future.

Mr. Michael English: The most interesting point about the Bill is that it could be introduced only in a free society. The idea of a member of the Supreme Soviet trying to take control of the audit of Government expenditure away from the Executive in Russia would be ludicrous.
It is unfortunate that even here the Government, who have control of the system of audit, have never thought fit to legislate on the subject for over 60 years. I can vouch for the fact that my hon. Friend the Member for Norwich, South (Mr. Garrett) first raised the issue in the General Sub-Committee of the Expenditure Committee, which I chaired and of which the Financial Secretary to the Treasury was an able leading Conservative member.
That Sub-Committee was appalled by what it found. We found not just what we have discussed today, but that, until 1975, the recruits to the Exchequer and Audit Department were not required to be graduates, or accountants or to have any professional qualifications. Through their control of the auditors' purse, their staffing, grading and cash, the Government had downgraded the job. The top Civil Service is frequently criticised for consisting of Oxbridge arts graduates. They are, at least, all first class or upper second class honours graduates. The top Civil Service consists of highly intelligent men. They are so intelligent that they deliberately downgraded the people supposed to audit them to ensure that they were less well qualified.
That is in addition to section 3(3) of the Exchequer and Audit Departments Act 1921, about which the Chief Secretary does not wish to hear. He did not mention it. He said nothing new in his speech. He has been a professional advocate. His speech was made on behalf of a great many fearful men. He is now their advocate. He talked about throwing away subsection (1), dealing with the power of the Comptroller and Auditor General to audit any account, but never mentioned subsection (3) which says, in effect, that if the Comptroller and Auditor General has an argument with a permanent secretary the Treasury would like to know about the argument but will then make its decision, including telling the Comptroller and Auditor General to shut up about it. Its legal effect is to say that the Treasury's decision will be final. I can think of many people in dubious companies who would love to have the right to tell their auditor to keep quiet and to say nothing. However, they would be dubious companies. It is a dubious subsection to wish to keep.
It is not like the Chief Secretary to take exactly the same attitude as the previous Government. When we reported from the Expenditure Committee on the subject, we received a totally negative answer from the Treasury in the previous Government. The 40-odd members of the Expenditure Committee were immediately supported by a high-powered Procedure Committee, which included several hon. Members who have spoken in this debate. We still got a negative answer. The eventual concession squeezed out of the previous Government was that there


would be a Green Paper on the subject. The Treasury was so unwilling to take that step that it had to be announced in the middle of the night by the Secretary of State for Industry.
One other piece of history is interesting. In order to discourage us, the Treasury and the Department of the Environment went round persuading the local authority associations to object to our proposals to chase public money. Some of the local authority associations, I think, regret now that they fell for it. They objected to the idea that the Comptroller and Auditor General, instead of the civil servants in the Department of the Environment, should audit them.
Now, of course, when they realise that they are under greater supervision and stricter control as a result of legislation introduced by the present Government, many of their officers, I believe, wish that they had been put under the Comptroller and Auditor General and the House of Commons. It is understandable that the right hon. Member for Chelmsford (Mr. St. John-Stevas) should have decided to leave local authorities out of the Bill as this Parliament has already legislated in respect of them. It is, however, an interesting piece of history.
People in the Department of Industry and the Department of Energy have been trying to persuade British industry as a whole to object to the Bill's proposals. It is to the shame of the Secretary of State for Energy, a member of the General Sub-Committee of the Expenditure Committee at the inception of our inquiry into the Civil Service, although he did not stay to sign the report, that this should have happened. Conan Doyle put in the mouth of Sherlock Holmes the famous remark about the dog that did not bark in the night. One of the dogs subjected to attempts at persuasion was the Institute of Directors.
In fact, as the right hon. Member for Chelmsford stated, Walter Goldsmith has come out in favour of the proposals. My hon. Friends, hearing the name of Walter Goldsmith, may not realise the significance. Walter Goldsmith is rather too clever to fall for this, or to allow himself to be used as someone else's front man. Someone else did not bark. In spite of the fact that nationalised industries are members of the CBI, the CBI, I understand, although it may wish to raise a few Committee points, maintains a position of strict neutrality, saying that this is a matter for the House of Commons and the Government to deal with. That is right and proper. I am glad to be able to say it.
I believe sincerely that the Government, in trying to stir up all industry, has succeeded in stirring up only those who are chairmen of industries owned by the state, who are responding to those who appoint them but not to those who pay them. It is the House as a whole, in many cases, that pays them, especially when they are subsidised.
It is a limited success to a campaign raised in Government. It is extremely interesting that some of the Treasury Ministers, not all of them, and other Ministers, but by no means all, are resisting any transfer of control. The powers that we propose to give to an Officer of the House of Commons, the Comptroller and Auditor General, are fewer than the powers that he now possesses, provided that the Treasury approves of the use of them.
It has been said that section 3(1) of the Exchequer and Audit Departments Act 1921 was hardly ever used. It has been used more than 20 times in its existence, so it is used and it has been used. I have checked with eminent lawyers and it literally gives the Treasury the power to order the

Comptroller and Auditor General to audit the local cricket club accounts, or any accounts. It means any accounts. I have checked this with lawyers as eminent as the Chief Secretary. The right hon. and learned Gentleman is going to give up that power—big deal. He will not give up the subsection which states that the Treasury's decision on any discussion is final. He did not mention that when I asked specifically about it.
It is interesting that the whole of the argument has been made to centre around what is essentially a Committee point. Although it is a substantial and important Committee point, the issue of the nationalised industries is not central to the Bill. It has received a great deal of discussion, but what is central to the Bill is the transfer of control over the audit from the Executive which is being audited. That is where the taxpayers' money is primarily spent—in the Executive and not in their nationalised industries. We hope that their nationalised industries are earning some money, and in many cases they do. For the Executive to control the audit of expenditure is ridiculous.
I hate to take issue with an expert, my hon. Friend the Member for Norwich, South, but he was wrong when he said that the Comptroller and Auditor General could not audit revenue. Under section 2 of the 1921 Act he has almost unlimited power to audit revenue because, of course, the Treasury wants to raise the money. As I understand it, section 2 is not affected by the Bill. The CAG will continue to have the same power as he has at present. Section 3 and other similar sections are the objections, because it is his power to audit expenditure that is limited at present by the control of the Treasury. That control goes up to the highest levels. The Treasury used its staffing control to downgrade in the past the civil servant employees of the Exchequer and Audit Department right up to the Comptroller and Auditor General himself, who is paid as a puisne judge. In spite of that fact, he is paid about one fifth of what the senior partner in a large firm of accountants receives as remuneration.
It is thus made difficult to recruit an eminent accountant or a person from another profession. If one does not pay for the job, one will find it difficult to recruit. There have been difficulties in recruitment on previous occasions, which is one of the reasons why the Comptroller and Auditor General has always been a high civil servant. A high civil servant will receive more money if he is paid as a puisne judge, but to someone in the accountancy profession it would be less money. That is precisely the objective of the exercise. It is attractive to a civil servant but unattractive to someone from outside.
Surely it would be a good idea if, for the first time since the reign of Richard H—the first time the House discussed the audit was in the reign of Richard II, when we did not have a free society and some hon. Members literally lost their heads as a result—the principal auditor of the United Kingdom's expenditure came from outside the system. Just once in a few hundred years we should surely have an eminent auditor from outside to examine our systems of controlling expenditure. That would not be a bad idea. We cannot say that Comptrollers have invariably been so brilliant that we should not consider an infusion of fresh blood from outside.
There are Committee points that I shall take up later, but not now. However, one of them is very important. There is no mention in the Bill, although the right hon. Member for Chelmsford used the phrase "quis custodiet", of who is to audit the auditor. That is peculiarly


interesting, because it illustrates the complete chaos into which the system has been allowed to fall under the control of the Treasury. The auditor in law—the person required to certify the accounts of the Comptroller and Auditor General and the Exchequer and Audit Department—is the Comptroller and Auditor General. He is required to certify those accounts, but since 1921 he has not done so. That is an undoubted breach of the law. The person who audits them, described as the auditor of the Civil List, who in this context has nothing to do with the Civil List, is—guess who?—Sir Douglas Wass, Permanent Secretary to the Treasury.
If the Bill is passed it will be important to decide, first, whether the Comptroller and Auditor General should continue to audit the accounts of the House of Commons, of which he would then become an Officer, and, secondly, to decide who will audit his accounts on the expenditure of money by him. An obvious solution would be a private commercial firm that could at least inspect his system to ensure that it is up to date. I have put forward that proposal previously in memoranda to the various Committees that have considered the matter.
Those points must be considered, but they are Committee points. I have seen no reason in any speech made in this debate, and I have listened to every speech, for anyone to say, on the basis of the nationalised industry point, that the Second Reading of the Bill should not take place today. The only person who has said that, damning the Bill with faint praise, was the Chief Secretary, who took 45 minutes to say that the Government do not wish to advocate opposition to the Bill. That was about the only statement of great principle that he made.
We are too frightened in this country. I took a Sub-Committee of the House to visit the Cours des Comptes in Paris and the General Accounting Office in America. I know that some civil servants and individual Members have visited them since, but we were the only organ of the House to visit those organisations. Although civil servants have visited those organisations, the Chief Secretary seemed to be poorly briefed.
The right hon. Member for Worthing (Mr. Higgins) mentioned the aircraft industry. It should please some Conservative Members that the Comptroller-General of the United States of America reported on the transport sector of the aircraft industry. That sector is private in America, but it received a Government subsidy. The Comptroller-General suggested that the subsidy should be removed and that the industry would be much more efficient if, as well as the Government subsidy being removed, many Government regulations were removed. As a result, a few years later, many regulations were abandoned. Much more freedom of market forces was permitted for American Airlines and—guess what?—even in the recession they are not doing too badly, thank you.
The Comptroller-General was allowed to investigate a private industry because it was receiving federal money. No one says that the Comptroller and Auditor General should audit each private company, public company, public corporation, or bodies such as the Arts Council if they are not taking public money. But when Lockheed takes a defence contract in the United States, it assumes that it will make a profit. It also assumes that part of the price that it pays for making a profit is to allow itself to be audited in order to ensure that it is not pinching

Government money in order to make a profit. It is as simple as that. When I say "pinching", I am not talking only of peculation—it might be just incompetence. But we are frightened in this country.
We are not trying to transfer executive control to the Comptroller and Auditor General. We are only trying to give him the power to publish a report. Anyone would think that we were treading on most sensitive portions of the anatomy of chairmen of nationalised industries. We seem to have trodden on their toes but from the squeals being emitted by them one would think that we had trodden on something else. We are not trying to remove powers from them, only to ensure that somebody on behalf of the House looks to the efficient use of public money. That is what this is all about. People who wish to conceal that fact under a cloud of objections from nationalised industries, local authorities or anybody else—Committee points basically—are ignoring the main point. We wish to see that the taxpayer is served by us as his representatives and served so that his money is efficiently spent.

Several Hon. Members: rose—

Mr. Deputy Speaker: Order. I remind the House again that the debate must end at 2.30 pm. The right hon. Member for Chelmsford (Mr. St. John-Stevas), whose Bill it is, will seek the leave of the House to reply briefly at the end and I hope that hon. Members will bear that in mind.

Mr. Nick Budgen: We speak no doubt in the presence of Mr. Gladstone's ghost. If you, Mr. Deputy Speaker, had time to call Mr. Gladstone I dare say that he would wish to address the House for three hours during which time he would combine, with a judicious blend, both political opportunism and theological learning. He would reflect at some length upon the way in which the Executive had become so overblown with its power that it had extended the activities of Government into so many spheres of our national life that they could no longer govern effectively.
But I suspect that after we had listened for two and a half hours and some hon. Members had become almost hopeful that we could revert to the brevity and lightness of a speech such as that of the Chief Secretary to the Treasury, we might, some of us, reflect that perhaps it was possible also for Parliament to exceed its powers. Of course, it is easy for us to make splendid assertions in a vague way about the necessity of upholding the rights, duties and privileges of the House of Commons. At times when there are specific duties and rights to be upheld, that is important, but I contend that it is more important to concentrate on specific criticisms—sometimes specific criticisms of a Government, of Ministers and sometimes even votes—than to make airy assertions about the general rights of Parliament.
However, Mr. Gladstone might approve of hon. Members trying to analyse to some extent what functions the House of Commons carries out well and what functions it carries out less well. I wish to assert that the House of Commons does not carry out particularly well any executive function. Of course, I use those vague terms because Britain has no precise division of powers. I would go on to assert that the House of Commons does not carry out quasi-judicial functions particularly well. But let us


look at what is proposed if the executive role were to be taken on by the House of Commons under the Bill. It is proposed that a substantial organisation, with at present about 800 people, should be responsible to a commission composed exclusively of hon. Members but for which no individual accepts ministerial responsibility. It is obvious that there may be times when it will be necessary to recruit more people to the 800. There will be wage negotiations for the 800. A new Comptroller and Auditor General will have to be appointed. In none of those detailed functions would the collective will of the House of Commons be particularly efficiently applied.
If, on the other hand, the Chairman of the Public Accounts Committee's equivalent then becomes the Minister, accepting responsibility, a different position emerges. It is said that that cannot be done because of the independent position that the Comptroller and Auditor General should have. But we have the analogous constitutional position of the higher judiciary, which is entirely independent. Indeed, it is one of the principal roles of the Lord Chancellor to defend its independence. Yet the Lord Chancellor is the Minister responsible for the higher judiciary, and where it is necessary for a Minister to answer on its behalf the Lord Chancellor so answers.
It seems to me likely to lead to the greatest confusion to set up a body that is neither a part of the Executive nor yet can be properly controlled by the legislature. I hope that considerable thought will be given to the proposals set out in part II of the Bill.
I understand the Government's embarrassment about not wishing to appear too obstructive towards the Bill, but their compromise of trying to work out a method by which the Comptroller and Auditor General can be appointed both by the House of Commons and the Government is nonsense. It would be much better for them to say that it cannot be done.
There are people whom the House of Commons can properly appoint. When the time comes for the election of Mr. Speaker we know the candidates. We can talk among ourselves. We can—perhaps not perfectly—express a House of Commons view about who should be Mr. Speaker. But we do not know enough to decide who should become Comptroller and Auditor General. We would end up by making a defective choice or, in fact, no choice at all. It would be a choice made by the Whips Office after consultation with the interested parties.

Mr. Barry Sheerman: It is a condemnation of the House and its whole purpose to say that the House could find no mechanism to appoint the Comptroller and Auditor General?

Mr. Budgen: It is not a condemnation of the House. It is a recognition that the House is a special institution. It is a legislature; it is a body that criticises the Executive. Its role is not to provide 635 people whose desire is most of all to become managing director of a large concern. We do not have a managerial and executive function. If we stray into that function, the nature of the institution will change and we shall become less good at those functions on which we ought to concentrate.
Do we wish to extend our quasi-judicial role? I had some brief experience on the Public Accounts Committee. I am bound to say that I did not think that the quasi-judicial role of the Public Accounts Committee was as good as the

proper judicial role exercised by the courts. I do not think that the House of Commons is at its best when it is exercising a quasi-judicial role.
Lest that should be thought to be just the view of a Tory obscurantist, perhaps I might invite the court—[HON. MEMBERS: "Oh!"]—I have some experience of seeing the judicial process at work, as I demonstrate by my Freudian slip.
On 19 January the hon. Member for Bassetlaw (Mr. Ashton) was moved to discuss with the House his experience of the Committee on Privileges—a quasi-judicial body. It is a quasi-judicial body, I might say, which tries to exercise its powers in a way that gives greater importance to the rights of individuals than does perhaps the Public Accounts Committee. The hon. Gentleman stated:
The Committee of Privileges is the most unfair committee of inquiry in the British Isles today. The onus is put on the defendent to decide whether to make a personal appearance before the Committee. If he decides not to appear he submits his evidence in writing, a long and tedious business. If he decides to go before the Committee he faces top QCs and receives no legal aid or help with the cross-examination. There is no transcript or Hansard report at the end of the trial. The press and public are not admitted. The jury meets every Wednesday afternoon and can come and go as it pleases. It is not necessary for the same jury to be present at the same trial every week. The verdict is announced without the defendent being told."—[Official Report, 19 January 1983; Vol. 35, c. 343.]

Mr. Sheerman: Does the hon. Gentleman accept that he has the facts wrong because the reason why our legislature is dying on its feet is that the Public Accounts Committee and the Comptroller and Auditor General need to be modernised to suit modern needs? The Committee of Privileges also needs modernising and revamping.

Mr. Budgen: If the House needs a change it should certainly reject modern managerial fashions and the type of arguments expressed by the hon. Member for Huddersfield, East (Mr. Sheerman). The historic role of the House is to criticise and legislate. Its role is to decide what money should be voted, not to hold quasi-judicial inquiries into the way in which that money is used. We move into new roles, perhaps not understanding what we do.
The balance of the House would be much changed by the proposals. I believe that that would damage the House, create inefficiencies and injustices to citizens. We are quick to talk about the arrogance of other institutions in the land. We are quick to point to the inefficiencies of the Executive and to the overwhelming arrogance of Government. It is just possible that the House of Commons itself is arrogant. It is just possible that we might over-estimate our powers and our capacity for interference.

Mr. Robert Maclennan: The hon. Member for Wolverhampton, South-West (Mr. Budgen) advanced a most novel conception of the House of Commons' role. His views reveal a misunderstanding of the Bill's purpose. It is novel to suggest that the House of Commons has only a legislative role. The hon. Member overlooked voting Supply and following public money wherever it goes. That is not, by any stretch of the imagination, a quasi-judicial function, nor can it be described as an Executive function. In proposing to improve the mechanism for the effective scrutiny of public money, Parliament does not seek to extend its role into either judicial or Executive spheres.
The greatest disappointment in today's debate was, without doubt, the speech by the Chief Secretary who spoke at length but failed to grasp the significance of what the House should do about a House of Commons matter. The threadbare nature of the right hon. and learned Gentleman's argument became clear when he suggested that foreign companies might be inhibited from investing here because of their fear that the Comptroller and Auditor General might perform functions similar to those that are performed in their countries.
I should have liked to ask whether the Chief Secretary has any evidence to suggest that British companies now, or previously, have been inhibited from investing in, for example, the United States. Having listened to him with great care, it seems that, despite the way in which he presented his case, we were faced with a straight conflict between the Executive and the legislature. He asserted the right and prime duty of the Government to be effectively the sole scrutineer of how public moneys go.
Although I pay tribute to the work of the right hon. Member for Chelmsford (Mr. Norman St. John-Stevas) in establishing Select Committees that have greatly assisted the House to perform its functions, there can be little doubt that the Public Accounts Committee is peculiarly strong because of the work of the Comptroller and Auditor General. The work of other departmental Committees will always be at some disadvantage unless there is a greatly increased back-up resource of the type that the Bill would provide.
The main debate has been about whether it is appropriate for the Comptroller and Auditor General's ambit to include the affairs of nationalised industries. As most of the issues have already been canvassed, I can be brief. The chairmen of nationalised industries have advanced two or three anxieties that I think are ill-founded. The first concerns confidentiality. If the chairmen had been able to produce any evidence—if they had they would have produced it—to suggest that the Public Accounts Committee or the Comptroller and Auditor General had abused their privileged positions with regard to secret or commercial information in the lifetime of the Comptroller and Auditor General's Department, that might have carried some weight. However, both the Committee and the Department have considered highly secret information in their present roles. For example, the Sting Ray torpedo system was considered last year. That is just one of many matters of great sensitivity and importance to national defence that have been considered. Not a word of criticism has ever been levelled on that count.
The chairmen of the nationalised industries concede that there should be some external accountability and control, but they seem to prefer the periodic investigations of the Monopolies and Mergers Commission to that which would be provided by the Comptroller and Auditor General taking a continuing interest in those industries' work. They should be reminded that no less a person than the Governor of the Bank of England, Lord Richardson, has strongly advocated the establishment of departmental committees for larger public companies, which would be a somewhat analogous role. They are being set up quite extensively in the private sector. When such large sums of public money are involved, the taxpayer has no less right

than the shareholder in a large private company to have information about economy, efficiency and effectiveness, which would be the work of audit committees.
I am pleased that my hon. Friend the Member for Farnworth (Mr. Roper) and I have been invited to support the Bill. As sponsors of the Bill, it is far from our wishes to interfere with the entrepreneurial needs of the leaders of nationalised industries. The Bill poses no such risk. The continuity of examination that the Bill would provide would be positively helpful to companies. It would reassure the House that the practices and actions of the industries conform with the best accounting procedures.
The Monopolies and Mergers Commission has not had the same long-standing experience as the CAG's Department in dealing with these matters. I do not believe that it is a suitable body to play such a role. I make no criticism of the reports that have been produced, but the Monopolies and Mergers Commission's method of proceeding is quasi-judicial. It is almost adversarial. The problem that comes from dealing with its reports was illustrated graphically in the Charter Consolidated-Anderson case as recently as last month.
We are embarked upon a difficult operation in seeking to give effect to the Public Accounts Committee's recommendations. I was proud to belong to that Committee. It made the recommendations that lie behind the Bill.
Today the Bill has enjoyed massive support on both sides of the House. The issue does not divide the House on party lines. It has been most encouraging to the sponsors of the Bill to see the overwhelming support. Therefore, I profoundly hope that the Bill will be speeded into Committee.

Mr. Tim Eggar: I join hon. Members in congratulating my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) on the Bill. Like most right hon. and hon. Members, I have been attracted by the need to reassert Parliament's right to follow public moneys. However, one must accept that one of the reasons why we are having to reassert that right is the traditional, or at least the past 50 years, indifference of hon. Members towards monitoring Government expenditure. It is our fault that the Executive has got away with it for so long.
Even today, despite the valiant efforts of my right hon. Friend the Member for Taunton (Mr. du Cann), hon. Members show surprisingly little interest in following through where Government money is spent. There is little interest in doing that, even among the new Select Committees, which have powers to examine Departments' estimates. There is even less interest in the Select Committees in looking at the economic performance, never mind the management performance, of the nationalised industries, which they are permitted to do. Even in this Parliament we have not done nearly as well as we should have.
We have been talking about the need to extend the powers of the CAG. His record has not been exactly exemplary in the task that he has been called upon to perform. There has been much talk about his role in effectiveness and efficiency audits. Having looked at some of the reports, I have been unimpressed by their quality. Perhaps that is hardly surprising when one realises how few economists there are in the CAG's Department.
In his evidence to the Public Accounts Committee the CAG admitted that he had allowed the big fish to get away. Therefore, whatever reservations we may have about the Monopolies and Mergers Commission and its role since the Competition Act 1980, we have to accept that it has done a far better job in the same area than the CAG could have done. The Executive, through the Rayner scrutinies and the implementation of Minis, has achieved more in the past three or four years than the Public Accounts Committee or the CAG has ever attempted to do.

Mr. Hordern: Perhaps my hon. Friend will bear in mind that a few years ago the Monopolies and Mergers Commission reported on the operation of the southern region of British Rail and made recommendations. The Serpell committee on British Rail has now reported. None of the commission's recommendations for the southern region has been adopted. Does my hon. Friend prefer the operation of the Monopolies and Mergers Commission to that of the CAG, who will have a running brief to oversee the nationalised industries?

Mr. Eggar: My point is that the CAG has similar powers to the MMC in relation to central Government Departments as the MMC has in relation to nationalised industries, and yet the CAG is unable to bring out reports of the same quality as the MMC has produced on nationalised industries.
I have two major reservations about the Bill. It must be made absolutely clear that under the new system proposed by my right hon. Friend the CAG will have no right to look at policy mattters. From the way in which the Bill is drafted, that is open to debate. I hope my right hon. Friend will make it clear that in Committee he will be willing to accept amendments to ensure that the CAG cannot question a policy decision, be it of the Government or of a nationalised industry.
My second and more major reservation arises over the power to look into the business of the nationalised industries. The thrust of Government policy has been to ensure that nationalised industries become more efficient, manage themselves better and act in as commercial a way as possible. I am convinced that the provisions of the Bill will move us in the opposite direction. The Bill seeks to impose powers and investigatory methods that may or may not be suited for a bureaucracy, but are certainly not suited for commercial undertakings.
My right hon. Friend the Member for Chelmsford and the right hon. Member for Heywood and Royton (Mr. Barnett) have said that the objective of the CAG will not be to second guess the industries. Every manager within the nationalised industries will know that, whenever he makes a decision, that decision can be brought out into the open. It is not as if the manager was employed by a commercial firm, where the internal auditor may raise issues and bring them to the notice of that person's superiors. The CAG can bring any failings out and put them before the public and the country.
That is bound to militate against courageous decision taking. It is bound to mean that managers will always opt for the easy course. They will be reluctant to make true management decisions. At a time when nationalised industries are seeking to devolve decision taking and to develop accounting systems at lower levels within their organisations, the result of the pressures that the Bill imposes will be to centralise those accounting systems and

that decision taking. I am afraid that it will encourage buck passing. It will also encourage participative decision making, rather than executive decision making. As my right hon. Friend the Member for Yeovil (Mr. Peyton) said, it will place a great premium on keeping a clean file.
Every decision taken within the nationalised industries, at whatever level, will have to be carefully documented, with long memoranda showing exactly why a decision was taken. That is not the sort of nationalised industry that we should be working towards and which should be making commercial decisions.
I am worried about the workings of clauses 3 and 4. On almost any interpretation, the dividing line between companies and other undertakings which the CAG has the right, or does not have the right, to investigate is extremely blurred. Under the Bill, all those companies, with the exception of the National Freight Corporation, that have been denationalised and privatised by the Government could be subjected to investigation by the new Public Audit Office. I do not believe that that is desirable. I hope that when my right hon. Friend replies to the debate he will make it clear that it is not his intention to allow the CAG to investigate the activities of companies or other entities in which the state has less than a 50 per cent. shareholding and also that he is prepared to drop the provisions relating to loan capital and the National Loans Fund.
As I hope I have made clear, I believe that there is a right and a need to strengthen the role of the CAG. There is a strong case for putting him under Parliament's control and not having the blocking power of the Treasury. Yet we must see much more evidence that the CAG, in his new guise, can carry out decent, effective and efficient audits within the Government before contemplating extending that right into the nationalised industries. Within the commercial sector, the Bill will do far more harm than good.

Mr. Bruce George: I shall speak for just six minutes to allow the right hon. Member for Chelmsford (Mr. St. John-Stevas) to reply to the debate. I wondered whether the Government would respond to the Bill with a full frontal attack, or use the Zulu tactic of the horns—the drawing-in of the enemy by encouraging complacency and then enveloping and destroying them. I suspect that, if the Bill reaches Committee, the latter will be their strategy.
The Bill is far from radical and revolutionary. Those watching our debates from abroad and seeing what is apparently frightening a few people will collapse on the floor with laughter because it is an exceedingly moderate device. The right hon. Member for Chelmsford deserves his place in the annuls of Parliament for what he has done so far. If he is successful against the odds in putting a second reform on the statute book, when he finally meets the great Chief Whip in the sky, those left behind will support his candidature for a plinth now vacant in the Members Lobby. I trust, for his sake, that he is not looking across the hall at another plinth, now vacant, to be occupied by another potential claimant, for all eternity.
This Parliament may go down in history as a reforming Parliament. We have had the Addled Parliament and the Pensioners Parliament, which had so many placemen. This may be the Stevas Parliament, or the Reform Parliament, because after many years of inactivity on reform, we have seen the Select Committees and some movement on


financial control, together with a number of minor reforms. The aspirations of Gladstone, who wanted to see the final squaring of the circle of financial control, may be achieved and it may be resquared or recircled 120 years later. The great reforms of such men as Barré, Burke, Fox and those in the Movement for Economic Reform after the American revolutionary war, culminating in the reform of 1860 have been eroded and dissipated. They have not just been usurped or taken by the Executive; they have been thrown away by our predecessors. When one listened to the speeches today, without meaning to be disparaging, one could see how those reforms have been thrown away in the past decades.
We want to see a modem legislature, not one like the one that the hon. Member for Wolverhampton, South-West (Mr. Budgen) wished to see, with a return to gas lights, top hats and sideburns. We must reform and modernise. We cannot fossilise our procedures at a point in time to satisfy conservatism and reaction of some hon. Members on both sides of the House.
The outside of the building has not weathered the elements well and the inside has weathered even less well. We have to adapt to the times. This is one modest procedure which, if implemented, will be welcomed not only by hon. Members but by people outside. We are not discharging our functions adequately. If we look at the minimum functions laid down by Professor Bernard Crick 20 years ago, we can see that we are still light years away from achieving them. He said that
Control means influence, not direct power; advice, not command; criticism, not obstruction; scrutiny, not initiation; and publicity, not secrecy.
We might not have achieved that level of control, but the House was founded on the principle of granting supply and monitoring expenditure. The medieval parliaments, after the Glorious Revolution, and those in the middle of the last century had a real influence and control, not in the sense of decision-making authority but in performing the tasks of a legislature of debating, scrutinising, discussing the allocating of resources, adequately, honestly and effectively.
That has gone, and we are clawing back some of the powers and this process must be continued. We are beginning to fight back. Listening to the hon. Member for Leeds, North-West (Sir D. Kaberry), the Chairman of the Industry and Trade Select Committee, one had the impression that we are almost rivalling the United States in its concept of a legislature. If we look at the 150 legislatures of the world, we see the two ends of a continuum. There is on the one side the United States, which has a genuine legislature, and on the other side there is the minimal legislatures of the Eastern bloc and legislatures within dictatorships.
If I were asked on which side of the centre of the continuum we are, I should say that we are nearer the side of the minimal legislature than the genuine legislature. We have to go, along with many of our parliamentary colleagues in Europe, much more towards recreating those powers and functions that should be attributed to a proper legislature.
This is a modest proposal. We are not asking to control expenditure in the sense of scrutinising it ourselves, as has been done in previous centuries. We want to see the CAG put on a par with his colleagues in the rest of the world.

We want to see him given more power and control and, as my hon. Friend the Member for Norwich, South (Mr. Garrett) has said time and again, we want to bring him back within the orbit of parliamentary control.
All this can be done. Many hon. Members have listened to the whole debate. The arguments have been won hands down by the right hon. Member for Chelmsford and his parliamentary colleagues on the Labour Benches as well. I hope that those who have not listened to the arguments will not do what has often been done, but will answer to our party's call in the true parliamentary way by voting where the Whips appear to be standing.
A modest reform will, as this Parliament ends, enable us to say that we participated in a Parliament that did not continue meekly to acquiesce with the Executive, but that we took part in a Parliament that, in one small way, clawed back some of the powers that had been taken away from us by the Executive, not just Conservative Executives, but Labour Executives when they were in office.

Mr. St. John-Stevas: I should like to congratulate——

Mr. Deputy Speaker: Order. The right hon. Member must seek the leave of the House to speak again.

Mr. St. John-Stevas: May I have the leave of the House to sum up?

Mr. Deputy Speaker: Yes.

Mr. St. John-Stevas: I congratulate the hon. Member for Walsall, South (Mr. George), not just on his contribution today but on the continuous support that he has given to the cause of parliamentary reform. One is grateful to him for his staunch support of this cause. I was interested in his allusion to my meeting the great Chief Whip in the sky. Did he have in mind our own Chief Whip, the Patronage Secretary, or a more celestial being? If it is the Patronage Secretary, I am not going.
I believe that it has been a most valuable debate, not just for those who have heard the speeches but also for those who will be able to read Hansard. I hope that the debate will reassure a great many people in the nationalised industries that there is a degree of expertise in the House which is available should it be required. I believe that the principle of the Bill has been widely accepted and that that has been recognised. However, there are various criticisms of points of detail, drafting points and so on. I can give the House the assurance that my hon. Friend the Member for Enfield, North (Mr. Eggar) required, that, of course, the Bill's sponsors will be ready to consider sympathetically and responsibly any amendments that may be proposed in Committee for the better working of the Bill.
I am grateful for some of the Chief Secretary's remarks. He was rather like Jekyll and Hyde. At one moment he was favourable to me and at the next highly critical. We can, perhaps, all agree that a little compression of his remarks might not have been totally out of place.
I hope that the Bill will be given a Second Reading. It is a parliamentary matter. I hope that no one will attempt to talk it out, because it has wide support. If there are reservations, they should be discussed in Committee. We have had a good debate today. There has been a debate outside the House also. The argument has been deployed. The weapons have been fired. Now is the time to lay down arms and take up the dialogue and argument.
The debate has shown that there is a wide community of interest between the House, the Government, the Opposition, the CAG and the chairmen of the nationalised industries. We are all working basically for the same thing—more efficient nationalised industries that will help supply jobs, and assist the country.
If, as I hope, the Bill is given a Second Reading, the principle will have been approved by the House and the details can be discussed in an irenic manner in Committee.

Mr. Maclennan: rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The House divided: Ayes 111, Noes 0.

Division No. 52]
[2.30 pm


AYES


Aitken, Jonathan
McCrindle, Robert


Atkinson, N. (H'gey,)
MacKenzie, Rt Hon Gregor


Barnett, Guy (Greenwich)
Maclennan, Robert


Barnett, Rt Hon Joel (H'wd)
McNally, Thomas


Bennett, Andrew (St'kp't N)
McNamara, Kevin


Benyon, Thomas (A'don)
Maude, Rt Hon Sir Angus


Benyon, W. (Buckingham)
Mawhinney, Dr Brian


Best, Keith
Meacher, Michael


Bevan, David Gilroy
Miller, Hal (B'grove)


Biggs-Davison, Sir John
Morrison, Hon C. (Devizes)


Blackburn, John
Normanton, Tom


Body, Richard
O'Halloran, Michael


Bonsor, Sir Nicholas
Owen, Rt Hon Dr David


Booth, Rt Hon Albert
Parker, John


Braine, Sir Bernard
Pavitt, Laurie


Bray, Dr Jeremy
Pitt, William Henry


Callaghan, Rt Hon J.
Prescott, John


Campbell-Savours, Dale
Price, C. (Lewisham W)


Cartwright, John
Price, Sir David (Eastleigh)


Cocks, Rt Hon M. (B'stol S)
Proctor, K. Harvey


Corrie, John
Radice, Giles


Cunliffe, Lawrence
Rathbone, Tim


Cunningham, G. (Islington S)
Rees, Rt Hon M (Leeds S)


Davis, Terry (B'ham, Stechf'd)
Rees-Davies, W. R.


Deakins, Eric
Rhys Williams, Sir Brandon


Dobson, Frank
Roberts, Ernest (Hackney N)


Dormand, Jack
Rooker, J. W.


Dubs, Alfred
Ross, Stephen (Isle of Wight)


du Cann, Rt Hon Edward
St. John-Stevas, Rt Hon N.


Dunlop, John
Shaw, Sir Michael (Scarb')


Dykes, Hugh
Sheerman, Barry


English, Michael
Sheldon, Rt Hon R.


Fisher, Sir Nigel
Shepherd, Richard


Fitt, Gerard
Shersby, Michael


Fletcher-Cooke, Sir Charles
Shore, Rt Hon Peter


Fraser, Rt Hon Sir Hugh
Short, Mrs Renée


Freeson, Rt Hon Reginald
Soley, Clive


Freud, Clement
Spearing, Nigel


Gardiner, George (Reigate)
Squire, Robin


George, Bruce
Stainton, Keith


Ginsburg, David
Stallard, A. W.


Gorst, John
Stanbrook, Ivor


Griffiths, E. (B'y St. Edm'ds)
Tapsell, Peter


Hamilton, W. W. (C'tral Fife)
Taylor, Mrs Ann (Bolton W)


Heddle, John
Temple-Morris, Peter


Higgins, Rt Hon Terence L.
Thorne, Neil (Ilford South)


Hooley, Frank
Tilley, John


Hordern, Peter
Townsend, Cyril D, (B'heath)


Howell, Ralph (N Norfolk)
Wainwright, R. (Colne V)


Hughes, Mark (Durham)
Wells, Bowen


Hughes, Robert (Aberdeen N)
Whitney, Raymond


Hunt, John (Ravensbourne)
Wilkinson, John


Johnson, James (Hull West)
Wolfson, Mark


Kaufman, Rt Hon Gerald
Wright, Sheila


Kilfedder, James A.



Langford-Holt, Sir John
Tellers for the Ayes:


Lawrence, Ivan
Mr. Michael Morris and


McCartney, Hugh
Mr. John Garrett.

NOES

NII

Tellers for the Noes: Mr. John Golding and Mr. John Spellar.

Question put accordingly and agreed to.

Question, That the Bill be now read a Second time, put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

CHARITIES BILL

Read a Second time.

Bill committed to a Standing Committee, pursuant to Standing Order No. 40 (Committal of Bills)

TOBACCO PRODUCTS (CONTROL OF ADVERTISING, SPONSORSHIP AND SALES PROMOTION) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday 20 May.

TRADE UNION (AMENDMENT) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday 25 February.

LEAD FREE PETROL BILL

Order read for resuming adjourned debate on Second Reading [21 January].

Hon. Members: Object.

Mr. Deputy Speaker (Mr. Bernard Weatherill): Second Reading what day? No day named.

TRADE UNION DEMOCRACY BILL

Order for Second Reading read.

Hon. Members: Object.

Mr. Deputy Speaker: Second Reading what day? No day named.

SALMON FISHERIES PROTECTION (SCOTLAND) BILL

Order for Second Reading read.

Hon. Members: Object.

Mr. Deputy Speaker: Second Reading what day? No day named.

DISEASES OF FISH [MONEY]

Queen's recommendation having been signified—

Resolved,
That, for the purposes of any Act of this Session to make further provision for preventing the spread of disease among fish, it is expedient to authorise the payment out of money provided by Parliament of—
(i) any expenses of any Minister of the Crown incurred in consequence of the Act, and
(2) any increase attributable to the Act in the sums so payable under any other Act.—[Mr. Ridley.]

Orders of the Day — Empty Industrial Buildings (Rating)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]

Mr. John Heddle: I am most grateful to you, Mr. Deputy Speaker, for giving me the opportunity this afternoon to raise the subject of the rating of empty industrial buildings in the west midlands. I also pay tribute to my hon. Friend the Under-Secretary of State for arranging his diary to be here today rather than with his constituents, whom he nurses most assiduously, as he nurses his responsibilities in the Department with great vigour and understanding, especially of the views of industrialists and ratepayers in my constituency and in the west midlands as a whole. I am grateful to have the support of my hon. Friend and parliamentary neighbour the Member for Aldridge-Brownhills (Mr. Shepherd).
The House has always been sympathetic to the plight of industry in the depths of a recession. I remind my hon. Friend the Under-Secretary of State that, in 1929, when Great Britain was going through the depths of a world recession similar to that of today, the House introduced the Local Government Act 1929, which put forward the concept of industrial derating. My hon. Friend will remind the House that the element of industrial derating introduced in that Act was 75 per cent., and that in 1958 that threshold was reduced to 50 per cent. Just before your entry into the House, Mr. Deputy Speaker, the House passed the Rating and Valuation Act 1961, which abolished the threshold to which I have just referred and the concept of industrial derating completely. I need not remind the House that the world recession that started in 1929 was well and truly played out, perhaps coincidentally—I leave the House to judge that—during the great Conservative Administration that lasted for 13 years and that expired temporarily in 1964.
In 1967 the House again introduced an Act relating to the re-rating of industrial premises which happened to be vacant for a while. Provisions for the rating of empty property were included in the Local Government Act 1966 and in the General Rate Act 1967, subsequently amended by the Local Government Act 1974. Section 17 of the 1967 Act enabled a rating authority to pass a resolution to rate unoccupied property. It also had the power to rescind that decision later if it so wished. It seems that many councils passed such resolutions.
Under the Local Government Act 1974 a local authority had a good deal of flexibility, in that different classes of property could be rated differently or property in only one part of a local authority's area need be rated at all. Only "relevant" properties, as defined by schedule 1 to the 1967 Act, were liable to rates when unoccupied. However, "relevant" properties seems to cover a multitude of things. The Act defines it as
any hereditament consisting of, or part of, a house, shop, office, factory, mill or other building whatsoever, together with any garden, yard, court, or other land ordinarily used or intended for use for the purposes of the building or part".
An empty property must have been empty for more than three months under current legislation before it becomes liable for rates, or for more than six months if it was a newly erected property.
My right hon. Friend the Secretary of State for the Environment introduced into the Committee stage of the Local Government, Planning and Land Act in 1980 the

concept that rating of empty property should be reduced from the heretofore penal level, which was introduced into the 1967 Act, of 100 per cent. to 50 per cent. That was certainly a step in the right direction. That proposal, welcomed throughout the length and breadth of the west midlands and beyond, and certainly welcomed by industrial and commercial ratepayers, was enshrined in the Rating Surcharge (Suspension) Order 1980 and the Unoccupied Property Rate (Variation of Current Ceiling) Order 1980.
On 25 June 1981—I doubt whether the House will remember this small teardrop in its history—I introduced under the ten minutes rule a Bill entitled the Rating (Business Premises Relief) Bill. The House gave the Bill permission for a Second Reading but, for reasons that I have not yet managed to fathom, sufficient parliamentary time was not allotted to enable that Bill to proceed to Committee.
I remind the House of two points that I made in the presentation of that Bill. I said:
This Bill therefore seeks to complement the aims of my right hon. Friend to impose a limit over which no local authority could levy rates on the commercial and industrial ratepayer. It also imposes upon rating authorities the inability to levy rates on vacant business premises. Notwithstanding the fact that the Government, rightly, in the Local Government, Planning and Land Act 1980, reduced that limit from 100 per cent. to 50 per cent., it is the view of my hon. Friends"—
the proposers of my Bill—
and myself that this right should be abolished. Empty factories make no profits for the owners. They simply involve the owners in the cost of upkeep. They do not provide the owners with value for money. The local authority provides the owners of these premises with no services.
This provision would remove the threat of a repetition of what happened in South Yorkshire recently where owners, frustrated because they were unable to afford void rates, were driven to start demolishing good quality factory premises.
The owner of those premises told me on that occasion:
If a businessman's rates bill goes up by one-third and then, because of the recession, business is down by one-third, rates become an intolerable and crippling burden".—[Official Report, 24 June 1981; Vol. 7, c. 249.]
My motion today relates specifically to the west midlands, but it is perhaps a convenient coincidence that the quotation that I have just read to the House related to the comments of a Yorkshire business man and my hon. Friend who will be replying, as I said earlier, nurses most assiduously a Yorkshire constituency and will be personally conversant with the problems.
In Great Britain today rates are the biggest single burden on trade and industry. Business will have to find more than £6 billion in the coming year to meet demands that will soon start flooding in from town and county halls. Everywhere that I go in the west midlands business men tell me that rates are putting enormous pressure upon them, upon their company budgets and inevitably therefore upon their employees' job security.
I quote the chairman and chief executive of Duport, a major employer in the west midlands, who says:
We have had two substantial cases where we have taken the roofs off empty premises involving over 800,000 square feet of floor space. We did not want to make the move, but it has saved us over £200,000 in rates on property which was not producing a penny in income. One of the premises was only a few hundred yards from the district authority boundary, and over that border no rates are charged on empty properties.
Mr. John Owen, group managing director of Rubery Owen Holdings, a major public company in the west midlands, had this to say:


We have taken the roofs off or are in the process of demolishing about half a million square feet of factory space and one of the chief motivating factors was the void rating system. We must have saved ourselves about £300,000 a year on our rates bill by the move.

Mr. Richard Shepherd: I appreciate my hon. Friend's giving me the opportunity to ask him a question in what is a most significant debate for the west midlands.
Rubery Owen operates within the metropolitan borough in which I am one of the Members of Parliament. One great concern is the variability of the application of the void rating rule. Walsall, for instance, because of its circumstances, whether prudently or otherwise, rates void buildings. That fact has contributed considerably to the dereliction of the area and the fall in employment. Investment is not directed into boroughs that are in the unhappy habit of rating empty and derelict buildings.
Could my hon. Friend give us an idea of whether he believes that void rating should be supported by Government grant to make up the deficit to local authorities such as Walsall, or whether he sees such local action as a direct result of the imprudence of those local authorities? Could he give us a more general view as to how business men can respond where they are not represented on local authorities?

Mr. Heddle: I am grateful to my hon. Friend for that intervention and for the way in which he has expressed to the House the views of the many business men in his constituency who are faced with rapacious demands from a local authority that does not exercise the commercial prudence or financial rectitude that the House seeks to impose on nationalised industries—a matter to which the House has been directing its attention a moment or two ago. Perhaps my hon. Friend will bear with me, because I have comments to make on how I believe that the House can impose its will on local authorities, although I take into account the point that he makes, that if local authorities are denied the right to raise revenue through rates on empty premises, there has to be an adjustment perhaps of the rate support grant system. The Minister may wish to refer to that matter in his reply.
Duport industries and Rubery Owen are not the only companies involved. BL and Plessey Telecommunications, companies which are household names, have been forced not only to remove roofs to render their premises uninhabitable and therefore unratable. They have demolished—they have razed the premises to the ground. Voluntary vandalism is imposed upon them because local authorities—not all, but some—do not understand the pressures on industry and commerce today.
Why should industrial commercial ratepayers, the owners of empty premises, pay rates to local authorities? They have no vote, no voice, no say and no sanction over how a council spends its money. The premises produce for them not one penny of production or profit. They receive no services for the empty premises.
It pains me to have to tell the House that on Monday 7 February, at the invitation of the owners, the London Life Association—probably the most responsible and oldest insurance company in the City—has asked me to take a pick axe and to remove the roofs from 60,000 sq ft of factory space in Wolverhampton simply to avoid the payment of £23,000 a year in rates on premises that the firm has been unable to let because of the recession.
Lichfield district council does not charge rates on empty premises, nor, I am happy to say, does the Tamworth council, which has travelled down the road to Damascus although it is Labour-controlled. Recently the Birmingham city council changed from being Labour to Conservative-controlled. Last week it announced not only that it would reduce rates by 12 per cent. in the next financial year, guarantee to maintain services and improve some of them, but that it would not levy rates on empty industrial premises.
Most business ratepayers recognise that local services have to be paid for and are willing to take a fair share of the cost. If we are to reverse the economic decline business must regain its lost competitiveness and thereby create faster growth and improved prospects for employment. The first step in achieving the upturn is to reduce costs. All companies have been doing that, some successfully, but in every case painfully, since the beginning of the recession.
I ask the Minister to agree that rating empty premises goes against the principle that rates are a tax on beneficial occupation. I ask him to agree that the cost of services provided by local authorities to empty business premises is relatively small and certainly does not equate with a 50 per cent. levy.
Business premises, particularly industrial property, are difficult to let or sell during the depths of a recession. Business costs must be reduced if Great Britain Ltd. is to become competitive in world markets again.
Amendments to primary legislation cannot be proposed in an Adjournment debate. I accept that and I therefore ask my hon. Friend to agree that my proposal to abolish councils' discretion, for the reasons that I have explained, do not require primary legislation. Under the powers given to my hon. Friend by the House, he can amend the General Rate Act 1967 by instrument.
I urge my hon. Friend to visit the midlands. If his diary permits, I urge him to accompany me to Wolverhampton on 7 February to see for himself the acts of voluntary vandalism into which business men are being forced to avoid the rapacious demands of spendthrift Labour-controlled councils, which care not a jot for company cash flow, but who should share with the Government the view—endorsed by all responsible authorities and institutions—that high rates cause high unemployment.

The Under-Secretary of State for the Environment (Mr. Giles Shaw): I congratulate my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) on continuing to discuss matters on the Adjournment which affect rates and other local government services. He has done that assiduously in the last few months. Department of the Environment Ministers are aware of his sustained efforts and, in our charitable way, we respect him totally.
The prime point of this debate is that there are provisions for a 50 per cent. ceiling for rates on redundant premises, but they are discretionary. In many cases, local authorities have been increasing the rate burden on industry, whether it be industry occupying full premises on which average rates are levied or on industries that, through recession, have found themselves with empty industrial property.
We must recognise first—I know that my hon. Friend does—that in terms of rating policy, local authorities must pursue the guidelines that are set to reduce rates, to try to


improve their services and make them more efficient so that the burden does not fall on the portion of ratepayers who are unrepresented—the industrial and commercial sector—or on those who are least able to pay during a period of protracted economic recession. The Government's guidelines on the rate support grant settlements are designed to preserve the central fabric of our economic management. If local authorities wilfully exceed their targets and levy excessive rates, further economic decline and substantial increases in local unemployment will follow.
That is the type of background against which rating issues must be debated. My hon. Friend has generously set aside some of the lessons that can be drawn from the activities of spendthrift local authorities and concentrated on the mechanism and what should be done about it. Rates are one of the major costs that face business in the west midlands, west Yorkshire and elsewhere. There is no doubt that they are getting more severe. My hon. Friend has painted a vivid picture of the problem in the west midlands and the action that has been taken by some industrialists to reduce the incidence of rating.
I shall now deal with what can be done about empty property rates. In view of the complexity of the provisions, I shall sketch in the background. My hon. Friend and I broadly agree about the fabric of the legislative framework. Property that is unoccupied for up to three months—up to six months in the case of new properties—enjoys exemption from rates. Thereafter, local authorities have a discretion to levy rates. Those powers were given to them shortly before all existing rating legislation was consolidated by the General Rate Act 1967. To use it, a rating authority must make an appropriate resolution to rate any or all classes of empty property in all or any part of its area, at any level up to the limit as specified in the legislation. Therefore, there is not an individual exemption. The decision must be a total one in the rating authority's area.
The aim is to give local authorities a means of discouraging owners from keeping property empty for purely speculative purposes. My hon. Friend will remember that that was considered to be a major social practice at the time. Until 1974, the ceiling up to which empty property rates could be levied was 50 per cent. of the amount that would be payable if the property was occupied. In 1974, however, to curb property speculation further, the ceiling was raised to 100 per cent. of the occupied rate. In addition, a mandatory progressive surcharge was introduced for commercial buildings, empty or occupied, which were not used for the purpose for which they had been constructed. At the same time local authorities were given the power to reduce or remit empty property rates in individual cases on grounds of hardship.
As soon as this Government took office, my right hon. Friend the Secretary of State for Defence, then the Secretary of State for the Environment, investigated the rating of both empty domestic and non-domestic property in the light of the many changes in climate in the property market. All interested bodies, including representatives of industry and the local authority associations, were involved in the investigation. It showed that the level of speculation that had prompted the introduction of maximum powers to rate empty property was largely a

thing of the past. Indeed, the problems of the recession were being exacerbated for industry by the requirement to pay, in some cases, substantial amounts of rates on nonproductive units that could not be sold.
Those findings presented clear grounds for reducing the severity of the empty property rating provisions, but we also had to consider the effect on local government finance. Abolition of empty property rates would have meant the sudden removal of a significant source of rate income. It would have led inevitably in some areas to an increase in the rate burden on other ratepayers, both domestic and non-domestic. The consequences of that would have been especially serious in areas suffering from a declining industrial base. There, the rate increases on the remaining firms would have reduced their competitiveness and, in some instances, put their very existence in jeopardy.
Nowhere was that more apparent than in the west Yorkshire wool textile belt where the steady decline of smaller companies—it was essentially a small company industry—left an enormous problem for local authorities in maintaining their income from the industrial ratepayer. Such decisions are serious for the rating authority, and balance is important. The rate increases on remaining firms would have reduced competitiveness and made it extremely difficult for them to survive for the better times that were surely ahead.
We also had to consider the provision of local services for empty premises. My hon. Friend suggested that they were not a sufficient argument to avoid dealing with the problem that he posed, but rates are a form of local property tax rather than a direct payment for services. However, empty property continues to benefit from the protection given by the police and fire services and, indirectly, from any local authority activities designed to combat or reduce vandalism. On balance, therefore, we decided that empty property rates should not be abolished outright. Instead, as my hon. Friend reminded the House, powers were taken in the Local Government, Planning and Land Act 1980 to enable the Secretary of State to vary by order both the ceilings on the amount of rates chargeable on empty, domestic or non-domestic properties and the initial grace period of three months to six months.
In addition, the 1980 Act suspended the provisions for the surcharge on unused commercial property. In view of the difficult economic situation faced by the business sector, my right hon. Friend the Secretary of State used those powers to reduce the ceiling on non-domestic property in general to 50 per cent. of the occupied rate with effect from 1 April 1981. As my hon. Friends the Members for Lichfield and Tamworth and Aldridge-Brownhills (Mr. Shepherd) will recognise, that made a valuable contribution to reducing the burden of rates on non-productive factories. I am sure that there was also a proportionate effect on the west midlands.
Since then the problems caused by the rating of empty property in areas such as the west midlands have considerably worsened. My hon. Friend has drawn attention to the lengths to which some firms may consider going to escape the burden imposed by the levying of rates, even at the maximum level, on 50 per cent. of their non-productive units.
I was much moved not only by the individual cases that my hon. Friend the Member for Lichfield and Tamworth


quoted but by the fact that a substantial number of companies was now involved. Hitherto there have been one or two celebrated cases, but only a few.
While I do not wish to dispute the facts quoted by my hon. Friend, I understand that there is less evidence of firms rendering property incapable of occupation to avoid empty rates than the publicity given to that topic suggests. Nevertheless, the Government deplore the prospect of such action, however limited. That it should have to happen at all, even as part of an accelerated process of planned demolition, highlights the real difficulties faced by manufacturing industry at a time of recession.
My hon. Friend has called for the abolition of local authorities' powers to levy rates on empty property. The Government have received many representations supporting such a move and the introduction of other forms of relief for businesses, of which my hon. Friends will be aware. Those representations have come not only from individual firms and business organisations but from some other significant national bodies.
As I have said, local authorities are not required to levy empty property rates. There is a strong argument for leaving to authorities the discretion to take decisions about empty property rates in the light of the circumstances in their area. Many—about half—choose not to levy empty property rates at all. Of those that do, some use their wide discretionary powers to good effect; to benefit, for instance, newly constructed industrial buildings and properties in inner city areas.
In many of the areas where careful and intelligent consideration of the effect of empty rating and sensible uses of their discretion are most needed, local authorities display little sign of such flexibility.
Circumstances vary across the country. I believe that in some areas empty property rates have a place at a level tailored to suit the economic circumstances of the area. It is the local authority that must exercise such discretion. We do look for flexibility.
I assure my hon. Friend that the Government are very conscious of and concerned about the effects of indiscriminate rating. My right hon. Friend the Secretary of State was asked about this issue on Wednesday by my hon. Friend the Member for Chipping Barnet (Mr. Chapman). He assured the House that he was keeping the issue under close review. He also undertook to talk to my right hon. and learned Friend the Chancellor of the Exchequer on this and related matters. I know he has discussed it as recently as 20 December with the Confederation of British Industry.
I assure my hon. Friend that I have considerable sympathy with the points that he and my hon. Friend the Member for Aldridge-Brownhills have made in this debate. The issues are clear and the Government must pay close attention to them. We shall continue to examine these problems in discussion with our colleagues to see whether further changes are warranted.

Question put and agreed to.

Adjourned accordingly at ten minutes past Three o'clock.